TPI Composites, Inc.

TPIC Details

TPI Composites, Inc. (NASDAQ: TPIC) manufactures and sells composite wind blades to original equipment manufacturers (OEMs) operating in the wind energy and transportation industry. Its revenues are categorized into 1) the United States, 2) Asia, 3) Mexico, 4) Europe, Middle East, and Africa (EMEA), and 5) India. It also provides precision molding and assembly systems and field service inspection and repair services to OEMs, wind farm owners, and operators worldwide. In Q1FY21, Mexico accounted for 29.27% of TPIC’s total revenue.

Q1FY21 Results: The company reported a 13.47% growth in net revenue to USD 404.68 million in Q1FY21 (ended March 31, 2021) compared to USD 356.64 million in Q1FY20, attributable to higher wind blades production volume (up 11% YoY) and favorable pricing (up 8% YoY). TPIC’s adjusted EBITDA increased by nine-folds to USD 13.10 million in Q1FY21 vs. USD 1.30 million in Q1FY20, with a 280 bps improvement in the adjusted EBITDA margin. In addition, the company reported a net loss of USD 1.80 million in Q1FY21, in contrast to USD 0.49 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents of USD 136.24 million and long-term debt of USD 180.98 million.

Key Risks: Four wind blade customers account for approximately all of TPIC's revenue; Vestas and GE Wind were the company's largest customers in FY20 and accounted for 49.7% and 23.4%, respectively, of its net sales. Hence, the loss of any of these key customers could hurt its financials. In addition, TPIC is dependent on a limited number of suppliers for its raw material and manufacturing equipment needs. Therefore, any failure on the contractual obligation by vendors could harm its operations. Moreover, TPIC operates in a wind turbine industry characterized by a small number of prominent OEMs. Most OEMs can manufacture some of their wind blades in-house, which leaves very few companies who outsource their wind blade production needs, thus intensifying the competition. Should this industry consolidate further, it could impair the financial and operational performance of the company.   

Outlook: For FY21, TPIC forecasts its revenue to be in the range of USD 1.75 – 1.85 billion, with an adjusted EBITDA to the tune of USD 110 – 135 million. It expects to utilize 80% – 85% of its available wind blade set capacity of 4,090 units on its 50 manufacturing lines and achieve an average selling price of USD 160 – 165 thousand per blade. TPIC estimates to clock non-blade sales of USD 100 – 125 million and incur USD 55 – 65 million in capital expenditures.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TPIC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TPIC stock price has decreased 19.87% and 37.20% in the past 3 and 6 months, respectively, and is currently leaning towards the lower band of the 52-week range of USD 24.02 to USD 81.36. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 29.26.  We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 35.16. We have chosen to remain on the sidelines and will reevaluate the thesis upon further improvement in debt metrics and profitability. Therefore, we recommend an “Avoid” rating on the stock at the current price of USD 38.98, down 3.78% as of July 19, 2021, 3:01 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

BioXcel Therapeutics, Inc.

BTAI Details

BioXcel Therapeutics, Inc. (NASDAQ: BTAI) is a clinical-stage biopharmaceutical company engaged in developing drugs in the field of neuroscience and immuno-oncology. It leverages artificial intelligence (AI) for drug re-innovation processes of approved product candidates to identify new therapeutic indices. Its main pipeline products are 1) BXCL501, a sublingual thin film formulation of dexmedetomidine (Dex) designed for the treatment of agitation resulting from neurological and psychiatric disorders, and 2) BXCL701, an immuno-oncology agent designed for the treatment of prostate and pancreatic cancer. As of July 19, 2021, its market capitalization stood at USD 755.52 million.

Public Offer: On June 23, 2021, BTAI announced the pricing of an underwritten public offering of 3,155,000 shares at an offer price of USD 31.70 per share. It expects to receive gross proceeds of USD 100.0 million from the FPO, which will be utilized to fund ongoing clinical trials, commercialization preparation, and for general corporate purposes. The underwriters have also been granted a 30-day option to purchase additional 473,250 shares (at the offer price) from BioXcel LLC, BTAI’s related party. Bank of America is the sole book-running manager for the offering, which is expected to close by June 25, 2021.

Step Towards Regulatory Approval: On May 19, 2021, BTAI announced that the U.S. Food and Drug Administration (FDA) accepted the filing for a New Drug Application (NDA) of BXCL501 and assigned a Prescription Drug User Fee Act (PDUFA) target action date of January 5, 2022.

Q1FY21 Results: The company has not generated any revenues to date. In Q1FY21 (ended March 31, 2021), R&D expenses rose 19.16% YoY to USD 14.74 million, and general & administrative expenses increased by USD 9.01 million to USD 11.64 million, due to higher employee-related expenses because of increased headcount, professional fees, and marketing-related expenses of BXCL501 “Boiling Point” educational campaign. Net loss for Q1FY21 amounted to USD 26.38 million vs. USD 14.91 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents of USD 194.02 million.

Key Risks: BTAI’s prospects are dependent on the success of BXCL501 and BXCL701. It has invested a significant amount of resources in their development, and if it fails to obtain marketing approvals or is unable to set up an efficient manufacturing and distribution mechanism in place, its results of operations could be adversely impacted. Furthermore, BTAI operates in a highly regulated industry and is subject to strict regulatory norms, both within and outside the U.S., non-observance of which could lead to delay, recall, or even suspension of approvals.

Outlook: In its Q1FY21 Report, BTAI stated that it expects to start the registrational program for BXCL501 in H2FY21, which rides on the grant of the breakthrough therapy designation for the drug by the FDA. It also plans to submit the Marketing Authorization Application (MAA) for BXCL501 with European Medicines Agency (EMA) in H2FY21.

BTAI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BTAI stock price has decreased 47.64% and 42.41% in the past 6 and 9 months, respectively, and is currently leaning towards the lower end of the 52-week range of USD 25.91 to USD 71.50. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 33.65.  We cannot value the stock as of now due to a lack of visibility of topline and profitability. Considering the significant correction in the stock price, we believe the current share price sufficiently reflects the business fundamentals. We have chosen to remain on the sidelines, and will re-evaluate the thesis upon commercialization of its drug candidates. Therefore, we recommend an “Avoid” rating on the stock at the closing price of USD 26.96, down 0.85% as of July 19, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

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