Azure Power Global Limited

AZRE Details

Azure Power Global Limited (NYSE: AZRE) it produces and sells solar energy in India. It is involved in the creation, construction, ownership, operation, maintenance, management, and generation of solar power plants. In India, the company's revenue comes from a mix of national and state government utilities and commercial firms.

Latest Update:

• Board Appointment: Delphine Voeltzel, a Managing Director at OMERS Infrastructure, was appointed to the AZRE Board of Directors on May 11, 2022.
• Commissioning of 90MW Solar Project in Assam: On May 2, 2022, AZRE announced that its 90 MW solar power project in Assam, the state's largest, had been successfully commissioned. The state's 90 MW capacity is distributed over four districts: Udalguri, Kamrup, Nagaon, and Cachar.
• Operational Metrics: As of December 31, 2021, there were 2,523 megawatts ("MWs") operational, up 37% from December 31, 2020. As of December 31, 2021, the total number of operating, contracted and awarded MWs was 7,425 MWs.

Financial Highlights: Q3FY22

• Q-o-Q Increase in Revenue: Due to an increase in operating capacity and electricity generation, the company generated revenue of INR 4.48 billion (USD 60.2 million) in Q3 FY22, compared to INR 3.52 billion in Q3 FY21.
• Increase in EBITDA: For the quarter ended December 31, 2021, adjusted EBITDA was INR 3,935 million (USD 52.9 million), up 152% from December 31, 2020. Additional revenue from new projects and revenue from clients accounted for most of the increase.
• Recovery in Bottom Line: The Company's net loss for Q3 FY22 was INR 610 million (USD 8.2 million), compared to INR 1,088 million in Q3 FY21, due to strong topline performance and margin expansion.

Guidance for FY 22 and FY23:

(Source: Company Investor Presentation for Q3 FY22)

Key Risks:

• Regulation Risk: AZRE works in India's highly regulated power industry, requiring the company to obtain and maintain several licences, registrations, and clearances to build and run power projects. If the company cannot accept such a license, it may suffer consequences.
  

Valuation Methodology: EV/SALES Multiple based Relative Valuation

(Source: Analysis by Kalkine Group)

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.   

Technical Summary Analysis:

1 Year Technical Price Chart (as of May 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

Stock Recommendation:

AZRE's stock price has fallen 37.4% in the past six months and is leaning towards the lower band of its 52-week range of USD 28.14 to USD 11.11. The stock is currently trading below its 50 and 200 SMA levels. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 16.77.

Considering the significant correction in the stock price, financial performance, guidance for FY22, strong pipeline of projects, robust business model, associated risks, and current valuation, we recommend a "Speculative Buy " rating on the stock at the current price of USD 13.89, down 1.98% as of May 24, 2022.

Technical Analysis Summary

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 the 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 unfavorable movement in the stock prices.

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 any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.