SolarEdge due diligence

Hatchworks has conducted due diligence on SolarEdge, a manufacturer of power inverters and a global leader in smart energy solutions operating in the renewable energy sector. It enables panels to generate more energy, reducing costs and increasing the ROI. The core products manufactured by SolarEdge include:

  1. Power Optimizer: Provides module-level maximum power point (MPP) tracking and real-time adjustments of current and voltage to the optimal working point of each individual PV module.
  2. PV Inverter: Specifically designed to work with the SolarEdge power optimizers making them less complicated and more cost efficient.
  3. PV Monitoring Platform: Provides enhanced maintenance of PV systems and monitoring for any fault detections.

Power Optimizers and PV Inverters account for c.87 % of sales, with the remaining c.13 % on sales of their PV Monitoring Platform. SolarEdge (SEDG) has operations in 29 countries and, of particular note, is a key player in the U.S in terms of both commercial and residential.

Geographical split of revenues (Source: Marketscreener.com and Investing.com)

SolarEdge, headquartered in Herzliya, Israel, was founded in 2006 and is listed on the’Nasdaq’ under the symbol ‘’SEDG’’.

Financials — SolarEdge
(Source: Marketscreener.com, investing.com)

SolarEdge’s (SEDG) market cap is $15.4B and stock price trades around $293.

With a predicted net-income growth of 54.3% for 2021E and 2022E, and a net income estimate for 2022E of in excess of $352M, this points to a P/E ratio of 54.1x.

The revenue/sales forecast is $2.5B for 2022E, indicating an EV/Sales ratio of 5.7x.

In terms of profitability, an operating margin of 13.9% is predicted for 2022E. This is higher than some of SolarEdge’s competitors; for example, SMA Solar Technology has an operating margin of 4.71% for 2022E. It’s worth noting that SolarEdge (SEDG) isn’t a yielding equity nor does it plan to be.

Updated: 09–08–2021.

If we take a look at the overall performance of SolarEdge (SEDG) from a technical standpoint, it’s up now around 301% from its March 2020 low and 27.3% away from an all-time-high. This significant upward move has to do with the popularity of the renewable energy sector along with the upcoming infrastructure bill that is likely to pass soon.

The renewable energy sector has already experienced a spectacular run, partially to do with policymakers that would like to reduce emissions and focus on green energy. The Biden administration has stated that it’s aiming for the US economy to reach net-zero emissions by 2050.

Updated: 09–08–2021.

As can be seen in the image below, SolarEdge (SEDG) and Enphase Energy (ENPH) have significantly outperformed their peers. Currently, SolarEdge’s (SEDG) vision is to expand its commercial and utility solar markets, particularly in the residential storage space. This is evidenced by the fact they have recently signed an agreement with Samsung for cells to boost its energy storage product in 2022, and have also partnered with Sunnova Energy to use its solar and storage assets in New England to improve power quality in the utility area.

According to a recent article, demand in the solar panel industry increased during the covid 19 pandemic as more people stayed at home for long periods and switched to solar panels to save on higher energy prices. Electricity has gone up by 4% on average over the last five years.

Peer performance since inception.

According to our analysis, SolarEdge (SEDG) shows a strong balance sheet along with a net-cash position and high growth rates. However, at its current valuation and the overhyped renewable energy sector, Hatchworks will keep SolarEdge (SEDG) on its radar.

The Hatchscore is 5.6 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies

What is SolarEdge?
A manufacturer of power inverter systems and a global leader in smart energy solutions that operates in the renewable energy sector, enabling panels to generate more energy, reducing costs and increasing the ROI.

Big Investors:

  • Fidelity Management & Research Co. LLC
  • BlackRock Fund Advisors.
  • The Vanguard Group, Inc.
  • Odey Asset Management LLP.

What are the risks?

  • Raising interest rates could hurt SolarEdge’s profitability. As a result, this could raise the cost of solar PV systems and therefore reduce demand for its products.
  • Increase in competition as new competitors enter the market, which could negatively affect SolarEdge’s profitability.
  • Any shortages, delays or price changes, which could affect SolarEdge’s profitability.
  • Conflicts in Israel due to unrest, terrorism, which could affect SolarEdge’s operational business.

Competitors:

  • SMA Solar Technology. (S92)
  • Trina Solar. (688599)
  • First Solar. (FSLR)
  • Enphase Energy. (ENPH)

Management team:

  • Zvi Lando: CEO.
  • Ronen Faier: CFO.
  • Ilan Yoscovich: CTO.
  • Uri Bechor: COO.

The Hatchworks Team

The forecast figures are based on the data of Marketscreener.com, and not from Hatchworks: https://www.marketscreener.com/quote/stock/SOLAREDGE-TECHNOLOGIES-I-21452890/financials/

Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ‘Hatchscore’. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.

Heading up the group’s R&D activities for Hatchworks.