BEST Inc

BEST Inc (NYSE: BEST) is a supply chain company. It provides a new retail platform that offers technology-enabled integrated solutions such as supply chain management, express delivery, freight, merchandise sourcing, cross-border supply chain, last-mile, financial and value-added services.  

Key highlights 

• Higher revenue guidance: Based on current market conditions and operations, the company expects its revenue for the full fiscal year of 2021 to be between RMB 34 billion and RMB 36 billion.

• Focusing on long-term sustainable growth and profitability: The company aims for long-term sustainable growth and profitability by focusing on gaining market share, improving operating efficiency, optimizing product structure, enhancing service quality and customer experience. Moreover, the company is continuously investing in automation to increase productivity and efficiency. 

• Registered sequential growth in the operational matrix: The company is continuously working closely with customers; thus, its presence is increasing, and the volumes are gaining strength in each segment, which is commendable. The two most significant revenue contributor segments are the express and freight segment, which registered a growth of 12.7% and 20.2% in 2020, against the previous corresponding period. 

Source: Company 

Financial overview of FY2020 (In thousands of RMB)

Source: Company 

• The company reported revenue of RMB 29,995.0 million, decreased by 7.3% against RMB 32,358.6 million in 2019. The decrease was primarily due to the decline in ASP per parcel in express business, partially offset by increased express parcel volume.
• Gross profit stood at RMB 238.1 million, decreased by 85.5%, compared to gross profit of RMB 1,637.3 million in the fiscal year 2019. The decrease was primarily due to a steeper ASP decrease than unit cost reduction in Express and Freight businesses. Gross Margin stood at 0.8%, decreased by 4.3 percentage points.
• In FY2020, the company posted a net loss of RMB 1,683.1 million, compared to a net income of RMB 172.7 million in 2019. Higher G&A expenses and higher interest expense dragged the bottom-line. 
• The company reported cash and cash equivalents of RMB 4,464.2 million as of December 31, 2020, against RMB 5,005.5 million as of December 31, 2019. 

Risks associated with investment

The risks involved with the business that can affect the company's financial health and operations are increased crude prices, low volume of goods, unavailability of the workforce, vigorous competition, etc. 

Stock recommendation

The Company suffered significant setbacks due to the pandemic in 2020, but it took several decisive actions to steer the Company back to the path of growth and profitability. The gradually improving macros and booming e-commerce market would lend tremendous support to the logistics and supply chain industry. The Company anticipates strong growth of its businesses as the year progresses, with strengthened market share, further optimization of costs structures to drive long term growth and profitability. While the express market is expected to remain competitive, ASP per parcel decline is likely to stabilize in the near term. The group also focuses on gaining market share, with a target of 20% to 25% volume growth and a reduction in cost per parcel by 10% in 2021.

On the valuation front, the stock is available at forward EV/Sales multiple of 0.19x against the industry median of 0.98x. Hence, considering the aforesaid rationale, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 2.16 on March 22, 2021.

1-Year Price Chart (as on March 22, 2021). Source: Refinitiv (Thomson Reuters)

Plug Power Inc.

Plug Power Inc. (NASDAQ: PLUG) is a leading provider of comprehensive hydrogen fuel cell technology solutions. The Company’s technology powers electric motors with hydrogen fuel cells amid an ongoing paradigm shift in the power, energy, and transportation industries.

Key Updates:

• On March 16, 2021, the company notified that it would not file its 10K for FY20 result within the specified date (March 16, 2021). As reported, the company is working diligently to finalize the restated financials and would file its 10-K form as soon as possible. Subsequent to the intimation, the group received a letter from the Nasdaq Listing Rule 5250, wherein the later informed that it has no immediate effect on the listing or trading of the company’s common stock on the Nasdaq Capital Market, while it has given a timeline of sixty-days (till May 17, 2021) to file its 10-K document. 

• Recently, the company reported that it has marked its presence in New York with the construction of a new hydrogen production facility and electric sub-station in the New York Science, Technology and Advanced Manufacturing Park (STAMP). The above facility is likely to produce 45 metric tons of green liquid hydrogen daily servicing the Northeast region.

FY20 Financial Highlights:

• PLUG announced its full-year result, wherein the company posted negative net revenue of USD (100.469) million, as compared to USD 230.239 million in FY19. Negative net revenue was due to a negatively impacted costs of USD 456 million, primarily related to non-cash charges for certain customer warrants.
• Total cost of revenue stood at USD 322.874 million v/s USD 202.273 million in FY19. The increase was driven by higher input costs like sales of fuel cell systems and related infrastructure, services performed on fuel cell systems and related infrastructure and higher services performed on fuel cell systems and related infrastructure costs.
• Total operating expenses stood at USD 126.921 million, higher than USD 78.008 million in FY19. The group reported a higher operating loss of USD 550.264 million, as compared to a loss of USD 50.042 million in FY19.
• Net loss stood significantly higher at USD 561.682 million, from a loss of USD 85.465 million in the previous financial year.

FY20 Income Statement Highlights

 (Source: Company Report)

Risks: The company’s operations are capital intensive in nature, hence any delay in funding would result in a liquidity crunch, which would hamper the company’s construction activities. Moreover, a change in consumer preference might result in lower demand for the company’s products.

Stock Recommendation:

PLUG has an impressive business model, wherein the company source electricity from hydro, wind, and solar power providers depending on the location and cost of electricity. Notably, the company has reported an impressive gross billing of USD 337 million in FY20 over its set target of USD 330 million. Furthermore, company expects growth in its order book supported by improved traction within the electrolyzer segment. For FY21, the company expects its gross billing at ~USD 475 million. Moreover, the company would focus on Capex and Opex investments across its green hydrogen and fuel cell platforms. For FY21, the company is focusing on the launch of JVs with Renault and SK Group, providing it a global footprint. However, on the valuation front, the stock is available at a forward EV to Sales multiple of 29.6x, which is significantly higher compared to the industry (Energy) mean of 6.0x. Hence, we prefer to remain on the sideline and suggest an ‘Expensive’ recommendation on the stock at the closing price of USD 38.91 on March 22, 2021.

One-year Price Chart (as on March 22, 2021). Source: Refinitiv (Thomson Reuters)

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