Kinsale Capital Group, Inc.

KNSL Details

Kinsale Capital Group, Inc. (NASDAQ: KNSL) is a specialty insurance business that provides property, casualty, and specialty insurance products in the US through the excess and surplus lines (E&S) market. It primarily offers these insurance products through a network of independent insurance brokers in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, and the United States Virgin Islands. Premiums and investment income generate revenue for the firm. As of October 14, 2021, the company's market capitalization stood at USD 3.69 billion.

Quarterly Dividend: On August 12, 2021, the company declared a cash dividend of USD 0.11 per common share, payable on September 13, 2021, to all shareholders of record on August 31, 2021. Over the last five years, the company has regularly paid dividends, as also reflected in the chart below (every D represents a dividend payment):

Consistent Dividends (Source: Refinitiv)

H1FY21 Results: The company reported a sharp uptick of 47.08% in total revenues to USD 291.29 million during H1FY21 (ended June 30, 2021) compared to USD 198.05 million during H1FY20, due to an increase in net written premiums. As a result, KNSL witnessed a rise in net income to USD 67.71 million during H1FY21 vs. USD 35.35 million during H1FY20. In addition, KNSL's net operating earnings increased to USD 54.95 million during H1FY21 from USD 36.37 million during H1FY20. As a result, the combined ratio (i.e., a percentage of incurred losses and expenses to earned premiums) for H1FY21 was 79.5%, compared to 83.9% during H1FY20.

Key Risks: The bulk of KNSL's products are distributed through a restricted number of brokers. For Instance, 46.1% of its FY20 gross written premiums were dispersed through five of its roughly 167 brokers, with three accounting for 34.8% of its FY20 gross written premiums. Accordingly, any interruption or termination of the company's relationship with these brokers might result in reduced gross written premiums, which might harm its financial situation.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

KNSL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: KNSL share price fell 19.90% in the past twelve months and is currently at the lower-band of the 52-week range of USD 152.12 to USD 252.70. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 50.70. We have valued the stock using the Price/Book Value multiple-based relative valuation methodology and arrived at a target price of USD 196.02. Considering the correction in the stock price, consistent dividend yield, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 166.69, up 2.93% as of October 14, 2021.

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

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Hyliion Holdings Corp.

HYLN Details

Hyliion Holdings Corp. (NYSE: HYLN) is a manufacturer of electrified powertrain systems for commercial vehicles. HYLN aims to lower the transportation industry's carbon intensity and Greenhouse Gas (GHG) emissions by developing electrified powertrain systems for Class 8 commercial vehicles (Gross Vehicle Weight Rating exceeds 33000 lbs). The company is at a pre-commercialization stage of development, with its electric Hybrid system in testing and the Hypertruck ERX system in the prototype phase.

Structuring the Engineering Division: On October 14, 2021, HYLN announced the appointment of Mr. Shiva Duraiswamy as Vice President of Engineering. At HYLN, he will be in charge of technical teams working on powertrain and battery innovation projects to controls and software systems implementation.

Release of Hybrid eX: HYLN announced the introduction of Hybrid eX, an improved version of its Hybrid Systems, on August 31, 2021, to be presented at the American Clean Transportation Expo in Long Beach, California. This upgraded model provides increased performance and cargo capacity while also enhancing the driving experience. HYLN anticipates beginning delivery of the Hybrid eX in H2FY21.

H1FY21 Results: HYLN is yet to generate revenue from its core business operations. The company reported a rise in loss from operations to USD 40.17 million during H1FY21 (ended June 30, 2021) compared to USD 6.79 million during H1FY20 due to an increase in research & development (R&D) and selling, general and administrative (SG&A) expenses. As a result, it witnessed a rise in net losses to USD 39.81 million during H1FY21 from USD 9.56 million reported in H1FY20. As of June 30, 2021, HYLN had cash and cash equivalents of USD 457.70 million and no outstanding debt.

Key Risks: HYLN's electric powertrain systems rely on highly sophisticated and complicated software and hardware developed and maintained internally or by third parties. These software and hardware may have flaws, faults, or vulnerabilities that, if not addressed immediately, might damage the company's reputation, results in a loss in customers and financial condition. Furthermore, some of the company's key components and raw materials are sourced from a single supplier. As a result, any delay in obtaining the required amount or unfavorable costs might skew its output, severely harming its overall operational state of affairs.

Outlook: HYLN stated on August 10, 2021, that it intends to begin generating revenue from launching a Hybrid product in H2FY21. It also expects its operational expenditures, including R&D and SG&A expenses, to be in the range of USD 130 - 140 million in FY21.

HYLN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HYLN's stock price has fallen 73.94% in the past twelve months and is currently close to the lower band of its 52-week range of USD 6.75 to USD 30.34. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 43.15. Considering the significant correction in the stock price, low leverage, recent product unveilings, anticipated revenue generation in FY21, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.59, up 6.30% as of October 14, 2021, 1:40 PM ET.

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

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

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