Azure Power Global Limited (AZRE) is a leading independent solar power producer in India. It develops, constructs, and operates utility scale, micro-grid, and rooftop solar projects. It sells solar power solutions based on long-term contracts with the Indian government and other non-governmental energy distribution companies and commercial customers.

The Union Cabinet chaired by the India’s Prime Minister, Shri Narendra Modi, has given its approval for the introduction of a production-linked incentive (PLI) scheme in high efficiency Solar PV Modules to enhance India’s manufacturing capabilities and exports under the ‘Atmanirbhar Bharat’ scheme. India has ambitious expansion plans in renewable energy, with a commitment to reducing  emissions intensity by 33% by 2030. This puts AZRE in a good position to reach new highs.

With its in-house engineering, procurement and construction expertise and advanced maintenance capabilities, AZRE has been managing the entire development and operation process, providing low-cost solar power solutions to customers throughout India. This has helped the stock gain 281.6% over the past year. This impressive performance combined with several other factors has helped AZRE earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates AZRE:

Trade Grade: A

AZRE is currently trading above its 50-day and 200-day moving averages of $37.1 and $24.9, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 61.6% gains over the past three months reflect solid short-term bullishness.

Although operational limitations and challenges because of COVID-19 have persisted, AZRE’s operating revenues have increased 23.1% year-over-year to $47.60 million in the fiscal second quarter ended September 30, 2020. Its adjusted EBITDA has increased 11.4% from its  year-ago value to $31.50 million, while EPS has improved 57.6% year-over-year over the same period.

On October 15, AZRE published its Sustainability Report for 2019-20. According to the report, the company remains a net carbon neutral company since inception and has helped avoid the release of 7.8 million tons of CO2 equivalents into the environment. In FY’20, the company has achieved an additional 40% saving in water consumption per unit of electricity generated and is on track to becoming water neutral by 2023. This demonstrates AZRE’s sustainable business practices in addressing climate-related risks.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, AZRE is well-positioned. The stock is currently trading 14.4% below its 52-week high of $53.6.

The company’s revenue over the past three years has grown at a CAGR of 33.4% over the past year. This can be attributed to the company’s efficient business operations and execution of long-term plans through ground-breaking innovation and access to leading solar solution technologies.

Peer Grade: C

AZRE is currently ranked #10 of 17 stocks in the Solar Industry. Other popular stocks in this industry are SolarEdge Technologies, Inc. (SEDG), Sunrun Inc. (RUN) and First Solar, Inc. (FSLR).

While RUN gained 398.4% over the past year beating AZRE return of 281.6%. In comparison, SEDG and FSLR gained 181.7% and 87.3%, respectively, over the same period.

Industry Rank: C

The Solar Industry is ranked #98  of  123 StockNews.com industries. The companies in this industry are focused on designing, manufacturing, installing, maintaining, monitoring, leasing, and selling solar energy systems to residential, commercial, government, and other customers worldwide.

Governments across the globe are accelerating the shift of their economies toward carbon-neutral energy sources with rising concerns about  climate change. Many countries have already set stringent carbon-emission norms and started incentivizing the clean energy space. As a result, the industry has become overcrowded with several new companies seeking to capitalize on the impending revolution. Many companies are finding it difficult to sustain their operations and are burning cash and relying on public investments and debt.

Overall POWR Rating: B (Buy)

AZRE is rated “Buy” due to its impressive past performance and short-term bullishness, as determined by the four components of our overall POWR Rating.

Bottom Line

Despite soaring more than 154.7% over the past six months, AZRE has the potential to grow further based on its continued business growth, favorable earnings and revenue outlook, and price momentum.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for AZRE. Analysts expect revenue to grow 36.1% year-over-year to $66.28 million in the current quarter (ending March 31, 2021).The consensus EPS estimate for the about-to-be reported quarter (ended December 31, 2020) indicates a 56.8% rise year-over-year. Analysts expect EPS for the next five years to grow at a CAGR of 108%. This outlook should keep AZRE’s price momentum alive in the near term.

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AZRE shares rose $0.32 (+0.70%) in after-hours trading Wednesday. Year-to-date, AZRE has gained 11.95%, versus a 2.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...

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