Solarvest Holdings Berhad - Second CGPP job award
Fri, 11-Oct-2024 07:45 am
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

1.94

Recommendation

Buy

Summary

  • Secured a RM104m CGPP contract for a 25.4MW solar farm, boosting order book to RM686.3m, equivalent to 1.4x FY24 revenue.

  • We expect the project to deliver RM7.8m in EBIT over its cycle, based on an EBIT margin of 7.5%, with peak revenue recognition expected in FY26.

  • Maintain BUY recommendation with an unchanged target price of RM1.94 based on SOP valuation.

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Company Update

 

  • Second CGPP contract win. Solarvest, through its wholly-owned subsidiary Atlantic Blue, has secured an EPCC contract from Suria Hijauan, an indirect subsidiary of LBS Bina, for a 25.4MW Solar PV Facility under the CGPP.

     

  • CGPP details. The project, with a contract value of RM104m, will have a capacity of 25.4MW and will be built in Senawang, Negeri Sembilan. Construction will commence immediately, with commercial operations expected by the end of 2025. The contract revolves around a direct interest from one of Solarvest’s Executive Directors, whose parents hold a 20% equity stake in Suria Hijauan.

     

  • Boost to order book. This latest win increases Solarvest’s outstanding order book to RM686.3m, equivalent to 1.4x FY24 revenue. Assuming a 7.5% EBIT margin, the project is expected to generate RM7.8m in EBIT over its cycle, with peak revenue recognition projected in FY26.

     

  • Earnings revision. No changes to our earnings forecasts, given that the contract win falls within our FY25F order book replenishment assumption of RM2.2bn, with CGPP expected to contribute c.RM750m.

     

  • Valuation. We maintain our BUY recommendation with a target price of RM1.94, based on a sum-of-parts (SOP) valuation. This is Solarvest’s second CGPP contract win this year (YTD: RM217.3m). Looking ahead, momentum is expected to continue, driven by the 800MW CGPP and the 2GW LSS5, with shortlisted winners for LSS5 expected in Nov.

     

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

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