Maxar Technologies Inc (TSX: MAXR) is an integrated space and geospatial intelligence company with a full range of space technology solutions for commercial and government customers including satellites, Earth imagery, geospatial data and analytics.

Key highlights

• Strong Guidance for FY 2022: The company’s performance in FY 2021, demonstrated that it is executing beautifully on the strategic growth plans. Moreover, the latest performance boosted the company’s confidence and shared strong guidance for FY 2022, where it expects to clock a revenue in a range of USD 1,790 – 1,870 million, along adjusted EBITA and operating cash flows in a range of USD 440 – 520 million and USD 340 – 420 million respectively.

• Strong order backlog: The company reported strong order backlog of USD 1,893 million on December 31, 2021, which declined nominally from USD 1,904 million on previous corresponding period. It registered a huge rise in backlog under Earth Intelligence segment at USD 1,028 million.

• Reduction in Net Debt: The company reported a constant decrease in its net debt, which is a key positive. At the end of Q4 FY2021, its net debt stood at USD 2,128 million, the lowest in the last five quarters. A lower net debt indicates higher financial flexibility.

Source: Company Presentation

• Industry beating margins: The Company maintained its pace and witnessed spirited performance across its margin matrix. In addition, the management’s solid determination helped them leap the industry median margins on many fronts in Q4 2021, which exhibits the competitive advantage of the company within the industry. The chart below gives a glimpse of this. 

  Source: REFINITIV, Analysis by Kalkine Group 

Risks associated with investment

The company’s business with various government entities is exposed to the risk associated with policies, priorities, regulations, mandate and funding levels. Furthermore, it requires innovative technologies to meet the needs of existing or potential new customers. It also faces competition that may cause either to reduce prices for imagery, related products and services or to lose market share.

Financial overview of FY 2021 (In mn of USD)

Source: Company Filing

• In FY 2021, the company’s total revenues increased to USD 1,770 million from USD 1,723 million in the previous corresponding period. An increase in revenue was primarily due to healthy performance from both Earth Intelligence and Space Infrastructure segments.

• Partially helped by lower product cost and lower depreciation expense in the reported period the company clocked an operating income of USD 176 million against USD 2.0 million in the previous corresponding period.

• Net income in FY 2021, stood at USD 46.0 million compared to USD 303.0 million in pcp, partially supported by income tax benefits. The company clocked gain on disposal of discontinued operation worth USD 317 million in FY 2020, due to which the net income was on the higher side.

Valuation Methodology (Illustrative): EV to Sales

Analysis by Kalkine Group 

Stock recommendation

The company's performance in FY 2021 demonstrated that it is executing well on its strategic growth plans, resulting in healthy revenue, Adjusted EBITDA growth, free cash flows, and notable awards from a diverse set of customers, including the National Reconnaissance Office, the National Geospatial Intelligence Agency, the US Army, several key US allies, and a number of leading technology companies.

As we look ahead to 2022 and beyond, the organization will continue to focus on execution and making investments in Earth Intelligence and Space Infrastructure. It also provided sales and adjusted EBITDA guidance for FY 2022, indicating continued strong growth. Therefore, based on the above rationales and valuation, we recommend a “Hold” rating at the closing price of CAD 36.58 as on February 25, 2022.  Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on February 25, 2022). Source: REFINITIV, Analysis by Kalkine Group 

 Technical Analysis Summary

Disclaimer

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