Azure Power Global Limited

Azure Power Global Limited (NYSE: AZRE) is India's largest independent renewable energy generator. It uses its in-house engineering, procurement, and construction expertise to develop, build, and operate utility-scale renewable energy projects and manage the development and operation processes.

Why Should Investors Book Profit?

• Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 4.27x as of December 31, 2021, compared to the industry norm of 2.64x. Furthermore, its long-term debt-to-total-capital ratio was 70.3%, compared to the industry average of 37.2% for the same period. These leveraged financials put the corporation at risk of huge swings due to the slightest adjustment in interest rates.
• Regulatory Scrutiny: AZRE operates in India's highly regulated power generation industry, requiring the company to obtain and maintain various licenses, registrations, and permits to develop and manage power projects. If the company cannot receive such a license, it could harm its operation.
• Technical weakness: AZRE's price is sustaining below the downward sloping trend line and facing the same resistance on the daily chart. Furthermore, the momentum oscillator RSI (14-period) is currently at ~40.84 level, trading in negative territory. On the weekly chart, the price is trading below the trend-following indicators 21-period and 50- period SMA, which may act as a resistance level for the stock. A critical support level for the stock, is placed at USD 14.90, while the key resistance level is placed at USD 19.60.

Valuation Methodology: EV/Sales 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.

Stock Recommendation:

AZRE's share price has declined 37.54% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 12.97 to USD 29.69. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 15.01.

Considering the company's highly leveraged balance sheet, regulatory risks, current valuation and associated risks. we recommend a "Sell" rating on the stock at the current price of USD 16.06, up 2.25% as of April 08, 2022.              

Three-Year Technical Price Chart (as of April 08, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.