Company Overview: Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI) holds investments in climate solutions, including energy efficiency, renewable energy, and other sustainable infrastructure markets.

­­­­­­HASI Details

Material Business Updates

Historical Financial Trend:

HASI illustrated sustainable top-line historical growth with mostly intact gross margins while keeping the value proposition intact. The Operating revenues have been growing since FY17 with consistent net income increases. Operating revenues grew at a 19.1% CAGR (FY17 – FY21).

First Quarter FY22 Performance:

Full-Year FY21 Performance:

Top 10 Shareholders:

The top 10 shareholders together form ~38.18% of the total shareholding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A., hold a maximum stake in the company at ~­­­8.91% and ~6.59%, respectively.

Key Metrics:

Consistent portfolio value and yield growth have brought forward decent and sustainable profitability trends. The improved pipeline, valuing over US$4 billion, may unveil growth prospects for the business.

Outlook:

Key Risks:

The projects of HASI are typically dependent on US federal, state, or local government incentives and policies that enhance or support the project’s economic viability. Hence, the business model is highly dependent on regulatory factors. High commodity price movements further add to the volatility risk side of the business.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

Performance Details: The company has delivered 6-month and 3-month returns of ~-31.91% and ~+1.02%, respectively. The stock is trading lower than the average of the 52-week high price of US$65.74 and the 52-week low price of US$34.66.

Valuation Rationale: The stock might trade at a slight discount to peers’ average P/E multiple (NTM), considering lower advisory fee generating opportunities and a fall in cash and cash equivalents in FY21 over FY20. For valuation, a few peers such as, Ormat Technologies Inc (NYSE: ORA), Nextera Energy Partners LP (NYSE: NEP), Montauk Renewables Inc (NASDAQ: MNTK), and others are considered.

Investment Rationale: Considering the sustainable fundamental growth, elevated yields in the distressed global scenario, government support, improved pipeline, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the closing market price of US$41.60 per share, up by ~2.49%, as of 3 May 2022.

Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

HASI 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 for upside potential, risks, holding duration, and 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 a 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.