Ormat Technologies, Inc.

ORA Details

Ormat Technologies, Inc. (NYSE: ORA) provides renewable power and energy solutions to its customers globally that it generates from geothermal and recovered energy. It also provides energy management and storage solutions.

Results Highlights for the Period Ended 30 June 2021 (Q2FY21)

• The revenue declined by 16.0% YoY to $146.9 million in Q2FY21 mainly due to lower product segment revenue, down by 83.0% YoY to $7.4 million in Q2FY21 primarily impacted by COVID-19. This offsets the sustained top-line growth in both electricity and energy storage segments.
• The net income attributable to stockholders stood at $13.0 million in Q2FY21, down 43.5% YoY, primarily due to lower revenue in the product segment and lower gross profit at the electricity segment.
• Product segment backlog increased by 59% to $59.1 million as of August 4, 2021.

Key Data (Source: Company Reports) 

Recent Update

As per the release dated 28 September 2021, the company along with PT Archi Indonesia Tbk has entered into an agreement to set up a joint venture company (JV), PT Toka Tindung Geothermal. This JV will focus on discovering the possible geothermal energy opportunities, particularly within the Toka Tindung gold mine concession area.

Outlook

The company has guided the revenue in the range of $650-$685 million in FY21 and adjusted EBITDA to stay in the range of $400-$410 million in FY21. Besides, the company is going as per the plan of increasing its overall geothermal, energy storage, and solar generating portfolio to around 1.5 GW by 2023 driven by the recent completion of the expansion of the McGinness Hills coupled with the inclusion of the recently acquired Dixie Valley and Beowawe assets, and its internal growth. Further, the addition of a 20MW/40MWh by Pomona-2 facility will boost ORA’s current 83MW/176MWh operating energy storage portfolio and will assist its plan of adding further energy storage projects in the range of 200-300MW by 2023.

Key Risks

The company’s global operations are exposed to risks like foreign laws and regulations along with geopolitical risk, and acts of terrorism.  Besides, a sustained drop in product backlog would have an adverse bearing on its target of full utilization of the production and manufacturing facilities.

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

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple colour line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered 6-month and 1-year returns of ~-15.60% and ~+12.69%, respectively. The stock is trading lower than the average of the 52-week high price of $128.87 and the 52-week low price of $57.40, which indicates a good opportunity for accumulation.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the significant increase in product segment backlog that grew by 59% to $59.1 million as of 4 August 2021 along with the steady and accelerating sales pipeline and sustained growth in its energy storage and electricity segments.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of $66.61 per share, down by 1.45%, as of 30^th September 2021.

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