Is Polaris Renewable Energy a buy? (November, 2024)

Following third quarter results that came in lower than his expectations, Beacon Securities analyst Kirk Wilson has maintained his “Buy” rating on Polaris Renewable Energy (Polaris Renewable Energy Stock Quote, Chart, News, Analysts, Financials TSX:PIF).

On October 31, PIF reported its Q3, 2024 results. The company posted Adjusted EBITDA of $12.4-million on revenue of $17.7-million, down from $18.8-million in the same period a year prior.

“I am pleased with the EBITDA and cash flow generation in the current quarter despite that fact that it is always a seasonally weak quarter for us due to seasonality in Peru, which was even lower than normal,” CEO Marc Murnaghan said. “This has also been made possible through continued cost control measures and decreased G&A expenses – worth highlighting in the current economic environment. In addition, I am very excited about the recent acquisition announcement with respect to Punta Lima. It rounds out our generation mix, accelerates our diversification strategy and increases our ability to grow organically.”

Wilson broke down the results.

“Polaris issued its Q3/24 operating and financial results that were lower than our expectations due mainly to the declines in Nicaragua and the El Nino impacting results more than forecasted in Peru,” he wrote. “Power production was 168.6 MWh in the quarter compared to our forecast of 183.7 MWh. The declines and lower Binary unit output in Nicaragua brought PIF’s largest producing asset in lower than we modelled, but it was still the highest output in a year from that asset. An abnormally dry season in Peru meant reduced hydrology that in turn limited hydro availability. As such, the 3 run-of-river assets in Peru were down 39% vs. our forecasts and 11% Y/Y. The other solar assets (Dominican Republic & Panama) were inline on a combined basis and the hydro project in Ecuador equaled our forecasts. With all projects except Vista Hermosa Solar park in Panama under longterm PPAs, revenue and EBITDA variances were mainly due to power production shortfalls. The revenue/EBITDA results of $17.7/$12.4 million were down 6% and 10%, respectively, Y/Y.”

In a research update to clients November 1, the analyst maintained his “Buy” rating and price target of $21.50, implying a return of 84% at the time of publication.

Wilson thinks PIF will post EBITDA of (all figures USD) $55.6-million on revenue of $76.8-million in fiscal 2024. He expects those numbers will improve to EBITDA of $61.9-million on a topline of $84.1-million in fiscal 2025.