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.

­­­­­­BEP Details

Material Business Updates

Third Quarter 2021 Results: As announced on 6 October 2021, BEP will hold its Q3FY21 Webcast and Conference Call on 5 November 2021, Friday at 09:00AM ET, to discuss business initiatives and financial results.

Efficiency Opportunities with Trane®: As announced on 8 July 2021, Brookfield Renewable entered an agreement with a global climate innovator, Trane Technologies (NYSE: TT), to deliver decarbonization-as-a-service for industrial, commercial, and public sector customers. The collaboration would reap the benefits of upgrades in building energy infrastructure and energy-efficient retrofits.

Historical Financial Trend:

BEP illustrated considerable top-line growth, specifically in FY20. Gross profits improved substantially at consistent margins. Debt levels have raised sequentially since FY18 to expand renewables’ portfolio. Operating revenues grew at an 11.2% CAGR (FY16 – FY20).

Figure 1: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Second Quarter FY21 Performance:

Figure 2: Quarterly Performance Highlights:

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY20 Performance:

Figure 3: Annual Performance Highlights:

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~44.19% of the total shareholding. Brookfield Asset Management, Inc.  and Fidelity Investments Canada ULC holds a maximum stake in the company at ~­­­25.00% and ~4.52%, respectively.

Figure 4: 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. Top-line and gross profits manifested synchronised growth attributed to steady margins. Eventually, BEP’s profitability and return status remain stable despite recent market disruptions.

Figure 5: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Solar Investments: BEP agreed to invest circa US$130 million, totalling around 900 MW of capacity, across two prominent solar projects in India. Furthermore, BEP invested alongside Apple Inc’s China Renewable Energy Fund and agreed to acquire 55% interest in a 213 MW contracted portfolio of wind assets at the cost of US$60 million.

Commissioned Development Projects: BEP commissioned 30 MW of development pipelines and progressed the construction of 4,696 MW of hydroelectricity, pumped storage, wind, solar PV and rooftop solar development projects.

Strategic Collaboration with Amazon: In Q2FY21, BEP entered a strategic partnership with Amazon for developing a new renewable energy project with power purchase agreements (PPAs). The agreement is expected to leverage BEP’s operating capacities to support the construction of a 31,000 MW global development pipeline.

Return Expectations: BEP is committed to achieving its decarbonization goals and simultaneously reap strong total returns in the range of 12% to 15% for the investors in the long term.

Key Risks:

Semiconductor Shortages: The recent global shortage of semiconductors has considerably affected the energy sector, especially in USA and China. The shortage 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 FX movements.

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

Stock Recommendation:

BEP has delivered positive 3-month and 6-month returns of ~3.247% and ~6.941%, 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 consistent gross margins. For valuation, a few peers like Ormat Technologies Inc (NYSE: ORA), 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 current market price of US$40.06, as of 02 November 2021, down by ~1.6%.

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.