Array Technologies, Inc.

ARRY Details

Array Technologies, Inc. (NASDAQ: ARRY) is one of the world’s leading manufacturers of ground-mounting systems, used in solar energy projects.

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

• Revenue Increased by 76%: The company recorded a growth of 76% YoY in its revenue to $202.8 million for Q2FY21, mainly led by strong demand for its products coupled with favourable comparisons to Q2FY20 that had lower shipments.
• Posted Net Loss of $17k: The company reported a net loss of $17k in Q2FY21 compared to a net income of $2.4 million in the PCP. However, adjusted net income for the quarter increased by 19% YoY to $8.5 million. Total executed contracts and awarded orders stood at $882 million on 30 June 2021, depicting a record level for the company.

Key Data (Source: Company Reports)

Announced $500 Million Capital Commitment from Blackstone

Entered into an Agreement: As per the press release dated 11 August 2021, the company declared that it has entered into an agreement to sell up to $500 million of perpetual preferred stock to private equity funds managed by Blackstone Energy Partners (“Blackstone”). The agreement entails selling $350 million of perpetual preferred stock to Blackstone at the initial closing. It includes selling up to an additional $150 million of perpetual preferred stock at any time prior to June 30, 2023, at ARRY’s option.

Use Of Funds: The company aims to utilise the funds from the initial closing to repay existing indebtedness and fund growth initiatives. As per the transaction, one member will be appointed by Blackstone to ARRY’s board of directors.

Risks:

A reduction in the price of electricity generated from the utility grid or from alternative energy sources would impact its business as well as the financials and prospects of the company. Substantial volatility in the cost of raw materials may hurt its financial performance. The growth of the company is mainly dependent on demand for solar energy projects in the global market, hence, any unfavourable situation would adversely affect its business.

Outlook:

Guidance: The company has guided achieving revenues between $850 million to $940 million in FY21. Further, it forecasts its adjusted EBITDA to stay between $55 million to $75 million and adjusted diluted net income per share to remain in the range of $0.15 to $0.25 in FY21. Notably, the company has changed its business processes to lessen its exposure to the impact of future increases in commodity prices and shipping costs.

Leadership Position Further Strengthened by the Investment Agreement with Blackstone: Besides, the investment agreement with Blackstone highlights its preeminent position in the solar industry and also validates ARRY’s long-term growth potential. The combination of the company’s technology and customer relationships with the financial strength and global reach of Blackstone,  positioned Array well to be a consolidator amidst the period of extraordinary supply chain disruption.

New Appointments: ARRY announced that it has appointed Bilal Khan, Paulo Almirante and Gerrard Schmid to the Board of Directors.

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

Stock Recommendation:

We have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation and have arrived at a target price that reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/EBITDA Multiple (NTM) (Peer Average), considering its decline in profitability in Q2FY21 as well as input and logistics costs headwind and lower current ratio at 1.96x in Q2FY21 versus Industry Median of 2.25x.

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

Thus, we give a “Sell” rating on the stock at the current market price of $19.01 per share, up by 9.38% on 18^th August 2021.

Daily Technical Overview Chart

Source: REFINITIV, Note: The orange color line represents 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.

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.

Disclaimer

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