Company Overview: Brookfield Renewable Partners L.P. (NYSE: BEP) owns and operates a portfolio of assets involved in renewable energy. BEP’s operating segments include hydroelectricity, wind, solar, and energy transition. The energy transition segment includes pumped storage, distributed generation, and cogeneration & biomass. BEP’s renewable power generating operations include wind facilities and conventional hydroelectric facilities.

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BEP Details

Material Business Updates

Figure 1: Key Highlights for Q3FY21

Source: Company Reports, Analysis by Kalkine Group

Historical Financial Trend:

BEP illustrated sustainable top-line growth since FY18 and marginally dipped in FY20. EBITDA margins have improved and gained consistency, hence mimicking the top-line growth pattern. Debt levels have risen sequentially since FY18 to expand renewables’ portfolio. Operating revenues grew at an 11.6% CAGR (FY16 – FY20).

Figure 2: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Third Quarter FY21 Performance:

Figure 3: Quarterly Performance Summary

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY20 Performance:

Figure 4: Annual Performance Highlights

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~44.17% of the total shareholding. In addition, Brookfield Asset Management, Inc. and Fidelity Investments Canada ULC holds a maximum stake in the company at ~­­­25.00% and ~4.52%, respectively.

Figure 5: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

Consistent growth in renewable power generation and rising contribution from acquired facilities has translated into long-term sustainable growth levels. As a result, top-line and gross profits manifested synchronised growth attributed to steady margins.

Figure 6: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Attractive Opportunities: The Decarbonization operations are expected to create an unparalleled commercial opportunity with over US$150 trillion investment in the next three decades.

Investment in Europe and Latin America: BEP agreed to acquire stakes in portfolios of a total of 785 megawatts of developed and operating assets at a total cost of US$250 million.

Rooftop Solar JV: In China, BEP entered a JV with a local partner and is expected to hold 500 megawatts of operating assets by the end of 2021.

Guidance: With a value-oriented approach, significant scale, and operation efficiencies, BEP is considering growing its distribution by 5-9% annually and delivering 12-15% total returns to the unitholders over the long-time horizon.

Key Risks:

Semiconductor Shortages: The recent global shortage of semiconductors has considerably affected the energy sector, especially in the USA and China. The deficiency may aggravate the risks of power generation shortfalls.

High Currency Fluctuation Risks: Considering high exposure of international operations, BEP’s financial status is highly susceptible to forex movements.

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

Stock Recommendation:

BEP has delivered negative 3-month and 6-month returns of ~10.415% and ~8.148%, respectively. The stock is trading below the average of the 52-week high price of US$49.87 and the 52-week low price of US$34.55, indicating an accumulation opportunity. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in % terms). The company might trade at a slight premium compared to its peers’ average EV/Sales (NTM trading multiple), considering dominated market standing and strong project pipeline. For valuation, a few peers like Duke Energy Corp (NYSE: DUK), Clearway Energy Inc (NYSE: CWEN), Nextera Energy Partners LP (NYSE: NEP) have been considered. Considering the concrete long-term PPAs, strategic collaborations, development in renewables and energy generation projects, and potential upside as indicated by the valuation, we give a “Buy” recommendation on the stock at the closing price of US$36.30, as of 30 November 2021, down by ~0.25%.

BEP Daily Technical Chart (Source: REFINITIV)

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.