Plug Power Inc.

PLUG Details

Plug Power Inc. (NASDAQ: PLUG) is a provider of comprehensive hydrogen fuel cell turnkey solutions which help address climate change and energy security while providing efficiency gains.

Q2FY21 Result Performance (For the Quarter Ended 30 June 2021)

• Net Revenue Rose to $124.6 million: The company has generated net revenue of $124.6 million in Q2FY21 compared to $68 million in Q2FY20. The shipments of GenDrive units stood at 3,666 compared to 2,683 GenDrive units in Q2FY20. Gross billings increased to $126.3 million from $72.4 million in Q2FY20.
• Gross Margin Remained Under Pressure: Its gross margin was negatively impacted by multiple factors that include significant costs associated with the sourcing of the hydrogen molecule as well as substantial costs due to the transition to new providers, and COVID-19 associated effect on the global supply chain. Resultantly, it has incurred a cost of ~$31 million associated with the fuel issues and ~$4 million related to COVID-19 in Q2FY21.

Key Data (Source: Company Reports)

Launching of  A New Organisational Design

The company, on 19 August 2021, launched  a new organizational design and  recruited four general managers with the objective of placing  the company well to cater to the rising demand for its clean energy solutions. The newly appointed general managers will lead individual business units and will work closely with the CEO as the company transitions from a single integrated business to a portfolio of related businesses to assist the global green hydrogen and fuel cell ecosystem.

Progress in Green Hydrogen Production Plant in Georgia

The company, on 10 August 2021, has broken ground on the site of a green hydrogen production plant in Camden County, Ga. This particular plant will produce 15 tons per day of liquid green hydrogen using 100% renewable energy and will cater to the customers in the south-eastern U.S. The setting up of the facility reflects its sustained commitment to establishing the first North American green hydrogen supply network.

Outlook

The company is eyeing to achieve $750 million in record gross billings in 2022 as it continues to focus on expanding customer relationships across entire businesses. Further, it is sustaining emphasis on fast-track expansion in green hydrogen generation business along with continued expansion through partnerships, joint ventures, and acquisitions in the hydrogen ecosystem. Additionally, PLUG is going as per plan to launch JVs with SK Group and Acciona in H2FY21.

Besides, the company has  launched HYVIA, a joint venture between Renault Group and the company, the first-to-market with turnkey hydrogen mobility solutions with an aim of 30% market share in hydrogen-powered light commercial vehicles in Europe by 2030. Further, it has announced  a strategic partnership with BAE Systems to develop hydrogen-powered electric buses.

Key Risks

The company’s products and services hinge primarily on the availability of hydrogen gas. A deficient supply of hydrogen could  hit its sales as well as deployment of the products and services. Fluctuations in the commodity prices and supply levels may hurt its costs. The company generates a majority of its revenue from certain anchor customers and the loss of any of these customers could severely hit  its business and financial condition.

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

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and  a target price that reflects a potential rise of low double-digit (in % terms) has arrived. A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering strong gross billings in Q2FY21, a better current ratio that stood at 19.78x in Q2FY21 than the industry median of 2.26x, and a lower debt-to-equity ratio that stood at 0.12x against the industry median of 0.29x.

Considering the aforementioned factors, along with its sustained strides towards global expansion, we give a “Buy” recommendation on the stock at the current market price of $26.06 per share, down by 0.27% on 31^st August 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.