Ultralife Corporation

ULBI Details

Ultralife Corporation (NASDAQ: ULBI) provides products and services ranging from power solutions to communications and electronics systems to government, defense, and commercial sectors globally. ULBI designs and manufactures power and communications systems, including rechargeable and non-rechargeable batteries, charging systems, electronics systems and accessories, and custom engineered systems including RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, etc.  

Q2FY21 Results: The company reported a 6.27% decline in revenue to USD 26.77 million in Q2FY21 (ended June 30, 2021) from USD 28.56 million in Q2FY20. Battery & Energy Products, which accounted for 85.45% of the total revenue in Q2FY21, reported a YoY decline of 4.83%, whereas the Communications Systems reduced by 13.90% YoY. Net income for the company reduced to USD 0.81 million in Q2FY21 vs. USD 1.66 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 15.83 million and total debt of USD 0.62 million.

Financial Metrics (Source: Investor Presentation, July 29, 2021)

Key Risks: ULBI derives the majority of the revenue from a limited number of customers. For example, in FY20, its top two customers L3Harris Technologies and Thales Defense & Security, Inc., accounted for 17% and 6%, respectively, of the total FY20 revenue. As a result, the loss of any of these key customers could harm its financial performance. Furthermore, sales to the US and foreign militaries or related entities comprised 42% of the ULBI revenue in FY20. Hence, any unfavorable budget and appropriation decisions made by the governments could adversely affect the company's financials.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(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.

ULBI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ULBI's stock price decreased 14.25% in the past three months and is currently leaning towards the lower band of its 52-week range of USD 5.10 to USD 11.78. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 31.43. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 8.84. Considering the correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.10, down 0.28% as of September 30, 2021, 11:44 AM ET.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.