28 July 2023
|Index / Fund / Rate||Start of Year||Last week||This Week||% change YTD|
|Lunar BCI WW Flexible Fund||141.43||170.91||169.67||19.97%|
|JSE ALSI||73 049||76 827||78 507||7.47%|
|NASDAQ Composite||10 467||14 033||14 033||35.06%|
|S&P 500||3 840||4 536||14 137||19.33%|
|Prime Lending Rate||10,50%||11.75%||11.75%||11.90%|
|Brent Crude ($’barrel)||85,95||80.61||84.87||-1.26%|
Weekly Stocktake with Danyaal
Enphase: New Power on the Block
Enphase Energy, a business held in the Lunar BCI Worldwide Flexible Fund and by Lunar Capital’s Offshore Portfolio clients, is an energy technology company that operates in the Americas, some European countries, and Australia. They specialize in selling solar generation and storage equipment, with all their devices seamlessly connected to the cloud for users to monitor their electricity usage, generation, and storage. Among Enphase’s products is the micro-inverter, which distinguishes itself from central inverters by having each micro-inverter being linked to separate solar panels. This setup ensures optimal panel performance as a whole, even when one panel is inactive or has been shaded by a leaf or something else. In contrast, a centralized inverter would convert energy less effectively if those same panels failed.
Last week, Enphase disclosed their Q2 2023 results. During the quarter, their net revenue amounted to $711 million, indicating a notable 34% growth compared to the same period last year. However, this Q2 revenue was slightly below the revenue of $726m in Q1. Enphase achieved a gross margin of 45.5% for the quarter, an increase of 4.2 percentage points compared to the same quarter last year. The net income for the period stood at $157 million, translating to a net income margin of just under 22%. In contrast, during the same quarter last year, Enphase’s net income margin was just below 15%. This performance not only reflects their ability to reduce product manufacturing costs but also highlights their ability to improve their operational efficiency. Most of Enphase’s manufacturing operations are in India and Mexico, where labour costs are lower than in the USA and Europe.
Historically, Enphase has typically experienced higher Q2 revenues compared to their Q1 revenues. However, this year, it was not the case. They attributed this anomaly primarily to the high interest rates in the US and reduced consumer spending across the economy. This resulted in a 12% decline in revenue for Enphase’s US operations. Despite the challenging global macro-economic conditions, their operations in Europe showed a significant improvement, with a remarkable 25% increase in revenue quarter on quarter. This growth can be attributed to Enphase operating from a lower market-share base in Europe compared to the US. As of last week Friday, Enphase’s market capitalization was just above $21 billion.
Enphase will likely benefit from a move to green and cleaner sources, residential clients reducing their dependencies on energy utility companies, European clients reducing their dependencies on hostile foreign countries (read Russia) for their oil and gas requirements; and also the move to electric vehicles.
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This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.