Hannon Armstrong Sustainable Infrastructure Capital, Inc.

HASI Details

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI) is engaged in climate solution investments, including energy efficiency, renewable energy, and other sustainable infrastructure markets.

Result Performance for Q3FY21 (For the Quarter Ended 30 September 2021)

• GAAP EPS stood at $(0.04) on a fully diluted basis for Q3FY21 versus $0.28 in Q3FY20. Further, the reported $0.41 distributable EPS on a fully diluted basis for Q3FY21 up 14% YoY.
• GAAP-based net Investment Income stood at $5.3 million for Q3FY21 and distributable Net Investment Income increased by 79% YoY to $32.0 million in Q3FY21.
• It closed $1.1 billion of investments in the current nine months of fiscal 2021, including over $200 million in Q3FY21 in a seasoned portfolio of residential solar assets.
• Launched $100 million CarbonCount-based Commercial Paper Note Program, the first such program in the US
• The portfolio increased 45% YoY to $3.2 billion and Managed Assets up by 28% YoY to $8.2 billion.
• Declared dividend of $0.35 per share.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

• On 20 December 2021, the company and ENGIE North America Inc., a leader in developing and managing renewable energy projects, advised the market about the operational completion of their 2.3-gigawatt (GW) portfolio of wind and utility-scale solar projects.

Outlook

The company anticipates annual distributable EPS to increase by a CAGR 7-10% from 2021 to 2023, considering the 2020 baseline of $1.55 per share, which is equivalent to a 2023 midpoint of $1.98 per share. The company also anticipates that annual dividends per share will increase at a 3-5% CAGR from 2021 to 202. This guidance indicates the company’s judgments and estimates of:

• The yield on its existing Portfolio.
• The yield on incremental Portfolio investments.
• The volume and profitability of securitization transactions.
• Amount, timing, debt and equity capital costs to fund new investments.
• Changes in costs and expenses indicative of the company’s forecasted operations.
• The general interest rate and market environment.

Key Risks

Semiconductor Shortage: The recent semiconductor chip shortage has delivered significant hurdles for equipment manufacturers for renewable energy products. If the deficiency persists for a year-long period, HASI may seek repayment issues from the borrowers. Credit Risk: the company is involved in debt underwriting processes; considering exogenous factors from COVID-19, portfolio investments may default on their loan repayments to HASI, giving rise to substantial cash flow problems.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Overview

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 6-month and one-year return of ~-12.26% and ~-22.14%, respectively. The stock is trading lower than the average price of the 52-week low-high range for the stock at $44.71–$72.39, respectively.

The stock has been valued using a Price/EPS multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to peer average Price/EPS multiple (NTM) (Peer Average), considering supply chain constraints, rising input costs, and labour shortage, impacting repayment flow. Also, the total revenue was unchanged in Q3FY21 due to lower gain on sale and fee income primarily led by a change in securitized asset mix and lower advisory fee generating opportunities.

Considering the factors above, we give a “Buy” recommendation on the stock at the closing market price of $49.86 per share, down by 7.77% as of 5^th January 2022.

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) is a part of Kalkine’s Global Green Energy Product

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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