Plug Power Inc.

PLUG Details

Plug Power Inc. (NASDAQ: PLUG) is a provider of comprehensive hydrogen fuel cell turnkey solutions.

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

• 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.

• 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 as the company terminated the fuel vendor relationship as well as transitioned to the new providers, and pandemic-related impact to the global supply chain.

Key Data (Source: Company Reports)

Recent Updates:

• As per the press release dated 13^th October 2021, the company along with Phillips 66 have entered into a memorandum of understanding to work together on the development of low-carbon hydrogen business prospects.
• The company, on 13 October 2021, announced that it has formed a strategic partnership with Airbus in order to study the feasibility of bringing green hydrogen to the future aircraft as well as airports worldwide.
• On 6 October 2021, PLUG and SK E&S, part of South Korea’s SK Group, announced the setting up a joint venture to fast-track the usage of hydrogen as an alternative energy source in Asian markets.

Outlook

The company is focusing towards expanding the customer relationships throughout all the businesses to achieve $750 Mn in the gross billings in 2022. 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.

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

Key Risks

The company’s products and performance hinge primarily on the availability of hydrogen gas. An insufficient supply of hydrogen could unfavourably hurt its sales as well as deployment of the products and services. Fluctuations in the commodity prices as well as product shortages could adversely affect the gross margins.

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

Stock Recommendation

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average) considering negative net margin in Q2 FY 2021. Also, the company is exposed to the risk of fluctuations in the commodity prices.

Considering the aforementioned factors and the associated business risks, we advise the investors to liquidate the stock.

We give a “Sell” rating on the stock at the current market price of $34.75 per share, as on 10:12am Washington DC, USA Time, as on 21st October 2021.

Technical Overview:

Chart:

Source: REFINITIV

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

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.