Sunrun Inc.

RUN Details

Sunrun Inc. (NASDAQ: RUN) is the top solar company player in the U.S with an entire focus on residential solar systems. It provides home solar, battery storage, and energy services to its customers present across 175 cities in 22 states and Puerto Rico.

H1FY21 Result Performance (For the Period Ended 30 June 2021)

• RUN has recorded healthy revenue growth of 87.73% YoY to $735.96 million in H1FY21 underpinned by 92% and 83% growth in revenue from customer agreements and incentives,  and solar energy systems and product sales, respectively.    
• Total operating expenses increased significantly by 96.14% YoY to $1,056.25 million in H1FY21. Resultantly, net loss attributable to common stockholders increased to $65.03 million from $41.52 million in the PCP.
• Net subscriber value stood at $5,574 in Q2FY21 and the generation of the total value was $122 million during Q2FY21.
• The company has added 26,110 customers in Q2FY21, including 21,894 subscriber additions that took its customer base to 599,743 as of 30 June 2021.

Consolidated Income Statement (Source: Company Reports)

Recent Update

Sunrun and GRID Alternatives Celebrated Their Long-Term Association: As per the press release dated 8 September 2021, the company along with GRID Alternatives celebrated their ten years of association. Their  partnership have  set up 18.3 MW of solar energy to 4,575 low-income homeowners.

Introduced Employee Education and Upskilling Program: The company, on 25 August 2021,  introduced a new fully-funded employee education and upskilling program – PowerU. This program is aimed at training and developing its workforce for the fast-growing clean energy industry.

Celebrated Accomplishment of Solar Installation for Renters in San Joaquin Valley: Self-Help Enterprises and Sunrun, on 16 August 2021, celebrated the completion of a new solar installation to 60 affordable rental homes at Sand Creek rental community in the San Joaquin Valley.

Outlook

Emboldened by accelerated growth the company is experiencing on the back of expanding customer value proposition and growing brand strength,  the management raised its growth guidance for solar energy  installed capacity to be 30% from its earlier  guidance of 25% to 30% growth for 2021. Additionally, it now expects to achieve a total value generated in the range of $700-750 million in 2021  mainly due to the adjustments pertaining to the effects of accelerating growth and timing of cost recognition. It reiterated garnering cost synergies resulting from the acquisition of Vivint Solar to be around $120 million in run-rate synergies by the end of 2021.

Key Risks

The company’s operations are exposed to risks of the impact of COVID-19 on its business and operations as well as the effective integration of Vivint Solar. Further, a material decline in the retail price of electricity generated from utilities or other sources as well as changes in regulations and policies, among others are some other potential risks.

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

Technical Overview:

Chart:

Source: REFINITIV

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

Stock Recommendation

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average) considering its higher operating costs, negative earnings in Q2FY21 as well as higher debt levels.

For the purposes of relative valuation, peers like Vicor Corp (VICR.OQ), Beam Global (BEEM.OQ), among others have been considered.

Considering traction in sales volumes along with record installation in Q2FY21, upgrade in guidance, expanding market reach, healthy liquidity position, and decent growth outlook, we give a “Buy” recommendation on the stock at the current market price of US$43.76, up by 2.17% on 16^th September 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.

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