Overall results exceeded our expectations. SLVEST and PEKAT outperformed expectations, while SAMAIDEN missed expectations.
We anticipate sustained earnings growth in the upcoming quarter, driven by the accelerated growth phase of the S-curve for CGPP EPCC projects.
Order book remains robust as of 31 Mar 2025, totalling RM2.2bn.
Maintain an OVERWEIGHT recommendation on the RE sector, with BUY ratings for SLVEST (TP: RM2.61), SAMAIDEN (TP: RM1.60), and PEKAT (TP: RM1.87).
Review. RE solar players have shown commendable results for 1QCY25. SLVEST and PEKAT exceeded our earnings forecasts, while SAMAIDEN’s earnings fell below expectations. 1QCY25 sector's core earnings surged by 43.9% qoq, primarily attributable to higher revenue recognition from CGPP projects.
SLVEST and PEKAT reported strong earnings growths, primarily due to increased contributions from the EPCC solar segment. Earnings growth were supported by higher revenue recognition from CGPP projects and greater demand in the C&I rooftop solar segment, which was likely influenced by the 14.2% increase in base tariff announced by TNB for the upcoming regulatory period (2025–2027). For PEKAT, results also reflected two additional months of contribution from EPE Switchgear (acquired in Dec 2024) within the Power division. Meanwhile, SAMAIDEN recorded the weaker results among the covered companies. Although earnings improved, the results were still below expectations primarily due to slower progress on CGPP projects and higher administrative costs.
Outlook. We expect solar EPCC contractors under our coverage to see sustained earnings improvement in the coming quarter, supported by the accelerated growth phase of the S-curve for CGPP EPCC projects. Near-term order book replenishment is anticipated to be driven mainly by LSS5, with an estimated 50% of unallocated EPCC project opportunities valued at RM2.9bn. The sizeable project pipeline should keep solar EPCC contractors active until the end-2027. YTD, SLVEST has secured a 26.5% market share, while SAMAIDEN has achieved a 2% share of LSS5 EPCC awards. The recent decline in solar module prices following the brief rebound in April has now stabilised at USD0.09/w, is expected to reduce the overall costs of solar systems. Lower system costs are likely to accelerate project pipeline conversions and reinforce the momentum of order replenishment for solar EPCC contractors.
In addition, the Energy Commission (EC) has recently opened submissions for Requests for Proposal (RFP) for 400MW and 1,600MWh Battery Energy Storage System (BESS) initiatives, with each 100MW and 400MWh project potentially valued at up to RM500m. The tender closes in July, with project awards expected by the end of 2025. Potential contributions from BESS project wins have yet to be factored into our forecasts for the companies within our universe.
As of 31 Mar 2025, the total unbilled order book for Solar EPCC contractors under our coverage rose to RM2.2bn, up from RM2.0bn at the end of 2024, notably with SLVEST’s order book reaching a record high of RM1.2bn. The ongoing rollout of LSS5 contracts continues to drive project opportunities, lifting the latest total unbilled order book to an estimated RM2.6bn.
Valuation & Recommendation. Under the recent earnings review, we maintained our BUY recommendations for the stocks within our universe. However, we made several target price (TP) adjustments: we raised PEKAT’s TP to RM1.87 (from RM1.55), and SLVEST’s TP to RM2.61 (from RM2.03), following a rollover of our valuation base year to FY27F. Meanwhile, we lowered our TP for SAMAIDEN to RM1.60 (from RM1.71) after factoring in earnings reduction. We maintain our OVERWEIGHT recommendation on the RE sector, supported by the consistent rollout of strong RE initiatives and robust growth prospects.
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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.210973 | 4.249411 |
EUR | 4.954495 | 4.965490 |
CNY | 0.589445 | 0.590817 |
HKD | 0.536642 | 0.541158 |
SGD | 3.306006 | 3.333319 |