Electricity (Utilities)
Renewable Energy Sector - 4QCY24 Earnings Review: Broadly in-line
Tue, 04-Mar-2025 07:05 am
by Tan Sue Wen • Apex Research

Summary

  • Overall results were largely in line with expectations. Two out of three RE companies under our core coverage (SLVEST and SAMAIDEN) met expectations, while PEKAT exceeded our forecast.

  • We expect project billings from CGPP projects to accelerate in the coming quarters, alongside EPCC job awards from LSS5, which will further strengthen Solar EPCC players with an estimated orderbook replenishment of RM5.8bn in the near term.

  • Maintain an OVERWEIGHT recommendation on the RE sector, with BUY ratings for SLVEST (TP: RM2.00), SAMAIDEN (TP: RM1.71), and PEKAT (TP: RM1.43).

 

Review. Two companies under our core coverage, SLVEST and SAMAIDEN, delivered 4QCY24 results in line with expectations, while PEKAT exceeded forecasts from better margins arising from lower-than-expected operating costs (administrative expenses).

 

Sector's core earnings expanded by 88.5% qoq and 83.5% yoy, primarily driven by cost savings from lower solar module prices (-11% qoq / -25% yoy). For SLVEST and SAMAIDEN, the strong performance was mainly attributed to robust progress billings from CGPP EPCC projects and higher contributions from electricity sales from solar plants. PEKAT's outperformance was driven by a reduction in administrative costs, increased project execution from ELP solutions, and new contribution from its recently acquired power distribution division.

 

Outlook. Over the near term, we reckon earnings growth will be driven primarily by project billings from CGPP projects, with solar plants set to achieve COD by the end-2025. We also expect rollout of EPCC jobs from LSS5 with an estimated orderbook replenishment of RM5.8bn, will keep Solar EPCC contractors busy until 2027. Overall, sector prospects remain bright, supported by key solar initiatives, including a 450MW quota under NEM, an extended RM4,000/kWac rebate under SolaRIS, the CREAM rooftop lease program, LSS5+ (2GW quota), the BESS program (400MW/1,600MWh capacity), BESS requirement waived under SELCO programme, and the planned rollout of LSS6, are expected to drive sustained earnings growth for Solar EPCC contractors in the foreseeable future.

 

Valuation & Recommendation. We maintain our OVERWEIGHT recommendation on the RE sector, supported by the consistent rollout of strong RE initiatives and robust growth potential. We maintain BUY recommendations for SAMAIDEN (TP: RM1.71) and SLVEST (TP: RM2.00). We have also upgraded PEKAT to BUY (from HOLD) with a higher target price of RM1.43 (previously RM1.17) following the rollover of our valuation metrics to FY26F.

 

Recommendation: Overweight
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