Ormat Technologies, Inc.

ORA Details

Ormat Technologies, Inc. (NYSE: ORA) happens to be a leading renewable energy provider.

Results Highlights for the Period Ended 30 June 2021 (Q2FY21)

• Revenue down 16% YoY: The revenue declined by 16.0% YoY to $146.9 million in Q2FY21 mainly due to lower product segment revenue, down by 83.0% YoY to $7.4 million in Q2FY21 primarily impacted by COVID-19.
• NPAT down 43.5% YoY: The net income attributable to stockholders stood at $13.0 million in Q2FY21, down 43.5% YoY, primarily due to lower revenue in the product segment and lower gross profit at the electricity segment. Product segment backlog increased by 59% to $59.1 million as of August 4, 2021.

Key Data (Source: Company Reports) 

Recent Update

• On 7^th October 2021, the company announced that it plans to report its third quarter 2021 financial results in a press release on November 3, 2021.
• On 28^th September 2021, it was highlighted that the company along with PT Archi Indonesia Tbk has entered into an agreement to set up a joint venture company (JV), PT Toka Tindung Geothermal. This JV will focus on discovering the possible geothermal energy opportunities in the Bitung area of North Sulawesi region, mainly within the Toka Tindung gold mine concession area.

Outlook

The company has guided the revenue in the range of $650-$685 million in FY21 and adjusted EBITDA to stay in the range of $400-$410 million in FY21. For FY 2021, electricity segment revenues is expected in the range of $585 Mn-$595 Mn and product segment revenues is expected in the range of $40 million and $60 million. Besides, the company is going as per the plan of increasing its combined geothermal, energy storage, and solar generating portfolio to more than 1.5 GW by 2023.

Key Risks

The company’s global operations are exposed to risks like foreign laws and regulations along with geopolitical risk and acts of terrorism.  Besides, a sustained drop in products backlog could have an adverse bearing on its target of full utilization of the production and manufacturing facilities.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

The company’s current ratio for Q2FY21 stood at 2.39x, better than the industry median of 1.02x, implying that the company possesses better capabilities to meet its short-term obligations than its peer group. Its Debt-to-Equity ratio for Q2FY21 stood at 0.78x, lower than the industry median of 2.43x, depicting reasonable leverage position of the company.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation method and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering higher revenues from electricity in 2Q FY 2021 on the YoY basis as well as decent outlook.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of $70.10 per share, down by 2.04% as on 25^th October 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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