Drax Group PLC

Drax Group PLC (LON: DRX) is a UK-based renewable energy company that operates a portfolio of renewable biomass and hydro assets. Noted below are the key price indicators for the stock:

Fundamental Update

Trading Update in Q1FY22: The company delivered decent performance during Q1FY22 and has reported an increase in the value of contracted power prices during 2022 – 2024. During the quarter, it has delivered a decent system support performance as its renewable electricity continued to support UK energy security. The Group has paid total dividends of 18.8 pence per share in 2021, compared to 17.1 pence per share paid in 2020.

The Group has also commissioned a 400kt of new biomass pellet production capacity in US southeast.

Risks: As per recent reports it emerged that the Chancellor of the Exchequer Rishi Sunak has ordered officials to prepare plans for a possible windfall tax on power generators as well as oil and gas firms. This poses a risk to the utility space.

Outlook: The Group expects full year-adjusted EBITDA for 2022 to be around the top of the range of analyst expectations. It also anticipates net debt to adjusted EBITDA to be substantially below 2x by the end of 2022.

Technical Observation (on the Weekly Chart)

DRX's prices started to correct from the higher levels after taking the resistance from an upward sloping trendline and also faced resistance from a horizontal trend line, indicating the possibility of a further downside correction. The leading indicator RSI (14-period) is moving southward from overbought zone. However, the CMP is above the trend-following indicator 21-period SMA and 50-period SMA, supporting an up-move.

Conclusion

As per the above-mentioned price action and technical indicators analysis, we have a ‘Watch’ rating on Drax Group PLC at the close price of GBX 700.00 (as of May 24, 2022). Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Note 1: Investment Related Risks: This report may be looked at by Investors with sufficient risk appetite looking for returns within a short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

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.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is May 24, 2022. The reference data in this report has been partly sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

GBP: British pound sterling

GBX: British pence sterling

RSI: Relative Strength Index

USD: United States dollar

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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