Ormat Technologies, Inc.

ORA Details

Ormat Technologies, Inc. (NYSE: ORA) provides global renewable power and energy solutions to its customers. It offers clean, reliable energy solutions which it generates from geothermal and recovered energy. It also provides energy management and storage solutions.

Results Performance for the Third Quarter Ended 30 September 2021 (Q3FY21)

• The total revenue stood at $158.84 million in Q3FY21, down 0.1% YoY. Segment-wise, revenue from Electricity, Product and Energy storage stood at $142.65 million (up 15.4% YoY), $10.53 million (down 64.5% YoY), and $5.66 million (Unchanged), respectively.
• Net income stood at $14.9 million in Q3FY21, down 5.0% YoY mainly due to lower operating income driven primarily by a $9.0 million raised in the G&A expenses.
• On 30 September 2021, cash equivalents stood at $267.80 million, versus $448.25 million as of 31 December 2020.

Source: Company Reports, Analysis by Kalkine Group

Outlook

On the segmental front, the company experienced a significant decline in the product backlog, which it believes resulted mainly due to the impact of COVID-19 and the unwillingness of potential customers to enter new commitments at this time. However, since the second quarter of 2021, the company has seen a limited recovery, increasing backlog. In the Energy Storage segment, revenues are generated primarily from participating in the energy and ancillary services markets and therefore are directly impacted by the prevailing energy prices in those markets.

The company is in the process of repowering the Heber 1 and Heber 2 power plants. In addition, it is planning to replace steam turbine and old OEC units with new advanced technology equipment that will add a net capacity of 11 MW. The company expect the commercial operation of Heber 2 at the end of 2022 and Heber 1 in the first quarter of 2023.

Key Risks

The company’s global operations are exposed to foreign laws & regulations, geopolitical risks, and acts of terrorism. Besides, a sustained drop in product backlog would have an adverse bearing on its full utilization of the production and manufacturing facilities.

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

Stock Recommendation

The company has delivered 6-month and 1-year returns of ~+10.83% and ~-3.11%, respectively. The stock is trading lower than the average of the 52-week high price of $128.87 and the 52-week low price of $63.7085

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price that reflects a low double-digit decline (in percentage terms). Accordingly, a slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering a reduced quick ratio at 1.14x in Q3FY21 versus 2.11x in Q3FY20 and a current ratio at 1.19x in Q3FY21 versus 2.25x in Q3FY20.

Considering the factors above, we give a “Sell” recommendation on the stock at the closing market price of $79.21 per share as on 9.30am USA Time as of 26^th November 2021.

Technical Overview:

Daily Price Chart

Tim

Source: REFINITIV, Note: Purple colour line reflects Relative Strength Index (14-Period)

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.