Azure Power Global Limited

Azure Power Global Limited (NYSE: AZRE) is an independent power producer, which sells solar electricity on long-term fixed-price contracts.

Investment Rationale – SELL at USD 23.72

• The stock has given a remarkable +48.53% growth in the last one year.
• The cost of operations increased by 16% during Q4 FY21, and subsequently, the Company reported significant net losses.
• From a technical standpoint, AZRE’s stock price is sustaining below the 100-day EMA (USD 25.53), reflecting a bearish momentum. Meanwhile, the momentum oscillator 14-day RSI (56.15) is moving towards the overbought position at the current levels.
• In the past six months, the stock price has shown a significant underperformance against the NYSE Composite index by delivering a negative ~34.91% return.

Risk Assessments

• Inflationary pressure can impact material and commodity prices.
• The change in tariffs and another potential wave of the Covid-19 pandemic can lead to project delays and create supply-related challenges.
• It has a limited operating history and relatively a new public entity.

Recent News

Disposal: On 5 April 2021, AZRE sold its non-core solar rooftop portfolio to Radiance Renewables Pvt Ltd, to improve the overall cost structure.

Financial Highlights (for the fourth quarter ended 31 March 2021, as on 15 June 2021)

 (Source: Company Website)

• During Q4 FY21, AZRE reported 16% year-on-year increase in the operating revenue; however, adverse weather conditions continued to impact the cost of operations.
• The net loss for Q4 FY21, AZRE stood at US$ 38.1 million since results were impacted by the impairment loss on assets.
• The Non-GAAP cash flow to equity reported a 55% year-on-year increase in Q4 FY21.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY22) (Illustrative)

Conclusion

Although the Company reported an increase in revenues and adjusted EBITDA during Q4 FY21, higher finance cost and impairment loss led to net loss for the Company. Moreover, the uncertainties pertinent to Covid-19 disruption is persisting. Moreover, as we are able to achieve our short-term upside target, it is better to liquidate at current level and will wait for a fresh technical level or growth catalyst to re-evaluate our stance in the short term. The stock made a 52 week High and Low of USD 53.60 and USD 15.16, respectively.

Based on the uncertain outlook, history of losses, challenging market conditions, with support from unfavourable valuation conducted above, we have given a “SELL” stance on Azure Power Global Limited at the closing price of USD 23.72 (as on 24 June 2021).

Arcturus Therapeutics Inc

Arcturus Therapeutics Inc (NASDAQ: ARCT) is a leading clinical-stage messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within the liver and rare respiratory diseases.

Investment Highlights – Arcturus Therapeutics Inc – SELL at USD 34.32

• ARCT majorly depends on the revenue from licenses and collaborative payments received for R&D, which does not guarantee long term revenues in case the Company faces any hiccups in the trials.
• The collaborated revenue and net loss had demonstrated a downward trend during Q1 FY21 as compared to Q1 FY20.
• The consensus estimates indicated that the Company would remain loss-making for the remaining quarters of 2021.
• From a technical standpoint, 50-day EMA (~USD 34.90) seems unfavourable and resist the upside potential in the stock price.

Key Risks

• Because license payments account for the majority of ARCT's revenue, any disruption or conflicts with its key partners might have a significant impact on the company's top line as well as the liquidity needed to sustain future studies.
• The company operates in a strict regulatory industry, and any change in regulations or policies could affect the overall business.
• The company's future is contingent on clinical trials and FDA approvals, and any delay could result in higher costs and a delay in income generation.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 13 May 2021)

 (Source: Company result)

• The Company had reported revenue of USD 2.1 million during Q1 FY21 against USD 2.6 million in the three months ended 31 March 2020.
• The R&D expenses increased by approximately USD 42.1 million on a YoY basis and USD 25.8 million on a QoQ basis.
• Operating expenses increased significantly to USD 59.8 million for the three months ended 31 March 2021, compared to USD 12.1 million for the three months ended 31 March 2020.
• The Company was able to maintain the cash balance at USD 466.9 million as of 31 March 2021, against cash and cash equivalents of USD 463.0 million in the previous quarter.

One Year Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

The Company has made accelerated progress towards the advancement of its clinical pipelines, but they still have a long road ahead. The management of the company remains optimistic on approval for ARCT-021, a differentiated mRNA vaccine candidate targeting COVID-19 which could become the preferred vaccine for Covid-19. The company now focuses on the liver and lung mRNA pipeline programs which could potentially be another major revenue driver for the company. The stock made a 52 week High and Low of USD 129.71 and USD 24.87, respectively.

Based on the negligible top-line business and weak profitability levels, we have given a "SELL" stance on Arcturus Therapeutics Inc at the closing market price of USD 34.32 (as of 24 June 2021), while we will suggest fresh buying when the Company turns profitable.

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

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