Solarvest Holdings Berhad - Result in line with expectations
Mon, 23-Sep-2024 06:09 am
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

1.94

Recommendation

Buy

Summary

  • Solarvest reported 1QFY25 core net profit of RM8.1m (-20.1% qoq, +8.4% yoy). We deem the results to be within expectations, constituting 16.8%/17.4% of ours/consensus full-year forecasts. 

  • We anticipate stronger quarters ahead, with the Group tendering for c.RM1bn in potential CGPP work orders.

  • Maintained our BUY recommendation with an unchanged target price of RM1.94 based on the Sum-of-Parts (SOP) valuation

 

Results Review

  • Within expectations. Solarvest’s 1QFY25 core net profit of RM8.1m was within expectations, despite representing only 16.8% of our FY25F earnings forecast and 17.4% of consensus estimates. We anticipate performance to pick up in coming quarters, supported by potential job awards from the upcoming CGPP programme.

  • QoQ. Core net profit fell -20.1% qoq, mainly due to weaker PBT contributions from the power supply segment (-51.4% qoq) and others segment (-89.3% qoq), which includes the trade of RECs and project development. Despite this, core profit margin improved to 11.2% from 10.5%, led by better margins in C&I projects as all LSS4 projects reached the tail-end of project cycle.

  • YoY/YTD. Core net profit increased by +8.4% yoy, thanks to significantly better PBT from the power supply (+408.13% yoy) and a turnaround in others segment to RM0.7m (vs 1QFY24: -RM0.1m). Net margins also improved substantially to 11.2% from 5.2%, driven by the above-mentioned factors.

  • Industry Highlights. To achieve 70% RE installed capacity, the government is required to consistently roll out an average of 2.2GW/pa of RE capacity. Coupled with the 2GW LSS5, 800MW CGPP, and 400MW NEM along with the recent introduction of CRESS, we estimate these initiatives could create c.RM8bn in job opportunities for EPCC players, including Solarvest, potentially keeping the Group busy until 2028.

  • Outlook. The Group currently holds an unbilled order book of RM469m, expected to be recognised progressively over FY25F-FY26F. Going forward, we foresee more project awards from CGPP with tenders c.RM1bn in contract value. This is likely to be followed by contributions from the 2GW LSS5, with shortlisted winners expected to be announced in 4Q24. Together with the mentioned solar initiatives, and a robust overseas project pipeline >2GW, this will further cement future orderbook replenishment outlook. 

  • Earnings revision. No changes to our forecasts, as results are deemed in-line with expectations.

  • Valuation. Maintain BUY recommendation and TP of RM1.94, based on Sum-of-Parts (SOP) valuation.

  • Risk. Reversal in solar module costs. Heavy reliance on government initiatives. Intense market competition.
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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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