Stocks’ Details

JinkoSolar Holding Company Limited

Business Update: JinkoSolar Holding Company Limited (NYSE: JKS) is engaged in manufacturing solar modules. The market capitalization of the company as on 15 January 2021, stood at ~$2.62 billion. As per a recent announcement, the company has completed its previously announced at-the-market-offerings of up to US$100,000,000 of its American depository shares, with each representing four ordinary shares of the company.

Q3FY20 Financial Update: The company reported decent financial performance during the quarter, with an increase in revenues by 17.2% to US$1.29 billion, when compared to the previous corresponding period. Quarterly shipments were up by 53.8% to 5,117 MW. Income from operations grew by 27.9% to US$80.4 million, during the quarter. There was a net income of US$1 million, owing to a loss of US$46.1 million due to a change in fair value of convertible senior notes and call option.  The cash position of the company stood at US$943.3 million as on 30 September 2020.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company expects an increase in demand in the near term. It expects total solar module shipments in the range of 5.5 GW to 6.0 GW, in Q4FY20. Revenue is anticipated in the range of US$1.31 billion to US$1.43 billion and gross margin to be between 13% and 15%.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:  The market share of the company is expected to go further to ~15% in FY20, compared to ~12% in FY19.  JKS gave a negative return of 33.76% in the past three months and a positive return of 185.24% in the past six months. The stock of JKS is trading above its average 52-weeks’ levels of $90.2-$11.42. On a technical front, the stock of JKS has a support level of $51.677 and a resistance level of $73.02. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation and have arrived at a target price with an upside of low double-digit (in % terms). For the purpose, we have taken peers such as Canadian Solar Inc (NASDAQ: CSIQ), Daqo New Energy Corp (NYSE: DQ), First Solar Inc (NASDAQ: FSLR), to name a few. Considering the increase in top line in 3QFY20, upside in valuation, decent returns in the past six months, optimistic business outlook and decent financial performance, we recommend a ‘Buy’ rating on the stock at the current market price of $57.99, down by 7.1% as on January 15, 2021.

Treehouse Foods, Inc.

Acquisition of Ebro’s Pasta Business:  Treehouse Foods, Inc. (NYSE: THS) manufactures and distributes private label packaged foods and beverages. The market capitalization of the company as on 15 January 2021, stood at ~$2.21 billion. As per a recent update, the company has completed the acquisition of a majority of Ebro's Riviana Foods U.S. branded pasta business for a cash consideration of $242.5 million. THS expects the acquisition to aid earnings by $0.20 to $0.30 per share in the first full year of operations. It expects normalized revenue of the acquired business to be between $170 and $180 million and normalized EBITDA is projected to be between $25 and $30 million, before achieving synergy.

Q3FY20 Financial Update: THS delivered a resilient business performance in the given quarter with earnings per diluted share from continuing operations at $0.20, compared to a loss of $1.08 during the previous corresponding period. It reported a revenue of $1,045.7 million in Q3FY20, compared to revenue of $1,057.3 million reported in the pcp. The debt of the company stood at $2,217.1 million as on 30 September 2020, and a cash position of $365.1 million during the same period end.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company has provided FY20 guidance for adjusted earnings per diluted share at $2.65 - $2.75 and revenue guidance of $4.20 to $4.40 billion. It expects free cash flow generation at the upper end of its original guidance range of $250 to $300 million. The company will host an audio webcast of its fourth-quarter earnings results on 11 February 2021.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company has witnessed an increased demand for its products during the pandemic. THS gave a negative return of 1.65% in the past three months and a negative return of 9.16% in the past six months. The stock of THS is trading below its average 52-weeks’high and low levels of $53.98-$33.50, respectively. On a technical front, the stock of THS has a support level of $35.52 and a resistance level of $45.456. We have valued the stock using a P/E multiple based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers such as J M Smucker Co (NYSE: SJM), Campbell Soup Co (NYSE: CPB), Conagra Brands Inc (NYSE: CAG), to name a few. Considering the current trading levels, upside in valuation, improvement in business performance and expected synergy from the acquisition of Ebro’s pasta business, we recommend a ‘Buy’ rating on the stock at the current market price of $39.27, up by 1.16% as on January 15, 2021.

Organigram Holdings Inc.

Q1FY21 Financial Update: Organigram Holdings Inc. (NASDAQ: OGI) is the parent company of Organigram Inc, which is a producer of cannabis. The market capitalization of the company as on 15 January 2021, stood at ~US$417.79 million. It reported decent growth in Q1 with an increase in Canadian adult-use recreational gross revenue by 42% to CAD22.5 million, from Q1FY20. However, there was a decrease of 11% in the total gross revenue to CAD25.28 million in Q1FY21, from CAD28.44 million in Q1FY20. OGI generated positive cash flow from operations of CAD0.3 million during the quarter. It exited the quarter with a cash and short-term investments of CAD134 million. Net loss during the period stood at CAD34.336 million.

Q1FY21 Financial Performance (Source: Company Reports)

Outlook: The company expects demands for its products to increase since the market for recreational substances has shown potential, with an annualized run rate of ~CAD3.2 billion.

Stock Recommendation:  The company witnessed a drop in revenue in Q1FY21 due to lower wholesale revenue from licensed products and a lower average selling price. OGI gave a positive return of 47.54% in the past three months and a positive return of 30.43% in the past six months. The stock of OGI is trading below its average 52-weeks’ levels of US$3.64-US$1.01. On a technical front, the stock of OGI has a support level of US$1.36 and a resistance level of US$2.36. Considering the current trading levels, steep price movement in the past months, losses in Q1FY21 and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of US$1.8, as on January 15, 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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