Stocks’ Details

Maxar Technologies Inc.

 Q1FY21 Result Highlights: Maxar Technologies Inc. (NYSE: MAXR) is a leading space technology and intelligence company that provides critical data and insights that government and commercial customers need to make informed decisions in an increasingly complex world. For Q1FY21, the company reported consolidated revenues of $392 million and an adjusted EBITDA of $67 million. Over the quarter, the company’s revenue and earnings were negatively impacted by a $28 million charge related to the Sirius-XM7 satellite program. During the period, MAXR signed several renewals with commercial and international government customers. It also won several study contracts supporting national security missions. Net loss for Q1FY21 stood at $84 million.

Q1FY21 Results (Source: Company Reports)

Upcoming Conferences: On 20 May 2021, the company’s Senior Management will present at BofA Securities 2021 Transportation, Airlines, and Industrials Conference. And on 25 May 2021, the Management will present at Barclays High Yield Bond & Syndicated Loan Conference.

Key Risks: The company is exposed to the risks associated with its satellite operations, including the partial or total impairment of the functional capacity of the satellite. The company is also exposed to the risk related to changes in political and economic stability, effects of austerity programs or similar significant budget reduction programs, and difficulties in obtaining or enforcing judgments in foreign jurisdictions.

Outlook: Looking ahead, the company is focused on launching the Legion constellation and successfully competing for the next generation of the EnhancedView program. Further, the company is focused on making investments in 3D technology, artificial intelligence, and machine learning. The company intends to drive cash flow and deploy capital in a disciplined fashion.

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

Data Source: Refinitiv, Thomson Reuters, 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.

Stock Recommendation:  Over the last three months, the stock has corrected by 38.91%. The stock is currently trading lower than the average 52-weeks’ price band of $58.75 -$8.65, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of $27.58 and resistance of $35.23. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe that the company can trade at a slight discount to its peer average EV/sales (NTM trading multiple), considering the rise in the net loss of Q1FY21, negative net margin, and key risks associated with the business. We have taken peers like Kratos Defense and Security Solutions Inc (NASDAQ: KTOS), Spirit AeroSystems Holdings Inc (NYSE: SPN), and Mercury Systems Inc (NASDAQ: MRCY), all belonging to Aerospace & Defense sector. Considering the recently won study contracts supporting national security missions, renewal with commercial and international government customers, expected launch of Legion constellation, current trading level, valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing price of $31.54, up by ~3.31% as on 7 May 2021.

Gilat Satellite Networks Ltd.

Q1FY21 Result Highlights: Gilat Satellite Networks Ltd. (NASDAQ: GILT) is a leading global provider of satellite-based broadband communications. During Q1FY21, the company witnessed decent momentum across all its business units, except for the IFC market segment, which is yet to witness a recovery. For Q1FY21, the company reported total revenues of $44.7 million, down from $47.7 million in Q1FY20. Over the quarter, the company made progress in its strategic growth areas of NGSO and Cellular Backhaul. Adjusted EBITDA loss for Q1FY21 stood at $1.4 million compared with an adjusted EBITDA loss of $5.0 million in Q1FY20.

Q1FY21 Result Highlights (Source: Company Reports)

Strategic Agreement with a Large Government Corporation: The company recently entered into a strategic agreement with a large government corporation in Asia Pacific, under which the company is responsible for building and operating the network to provide nationwide coverage for a range of applications. The agreement is valued at tens of millions of dollars, including potential for significant project expansions.

Key Risks: The company is exposed to the risks associated with the outbreak and global spread of the coronavirus (COVID-19) pandemic and changes in general economic and business conditions. Introduction of competing products by other companies could also impact the company’s market share and its financial performance.