Solarvest Holdings Berhad - Growth Intact
Wed, 26-Feb-2025 09:28 am
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

2.000

Recommendation

Buy

Summary

  • Solarvest’s 3QFY25 CNP surged 79.7% qoq and 61.3% yoy to RM16.2m, bringing 9MFY25 CNP to RM33.3m (+34.0% yoy). Reported figures deemed to be within expectations, despite accounting for only 65.7% of our forecast and 69.0% of consensus estimates. We anticipate a stronger quarter ahead, driven by higher billings from EPCC jobs for CGPP projects.

  • Prospects are strong underpinned by clear RE initiatives namely LSS5, LSS5+ and LSS6, with an estimated RM17bn in EPCC job opportunities over the next two years.

  • Maintain BUY recommendation with an unchanged target price of RM2.00, based on a sum-of-parts (SOP) valuation, and appraised with a three-star ESG rating.

 

Within expectations. Solarvest’s 9MFY25 core net profit (CNP) of RM33.3m accounted for 65.7% of our CNP forecast of RM50.7m and 69.0% of the consensus FY25F CNP forecast of RM48.3m. Still, we deem the results to be within expectations, as we anticipate a stronger quarter ahead driven by higher billings from EPCC jobs for CGPP projects.

 

qoq. Excluding forex impact (RM0.1m) and impairment loss on assets (RM1.7m), CNP surged 79.7% to RM16.2m, driven by strong progress billings from its CGPP EPCC jobs. CNP margin improvement of 3.3%-pts, thanks to softening of solar PV module costs as well as the depreciating of the CNY against MYR.

 

yoy/ytd. CNP was rose by 61.3%yoy / 34.0%ytd, primarily due to stronger contributions from LSS4 plants in the power supply division (+778.9% yoy, +223.3% ytd) and cost savings from lower solar modules costs (-25% yoy to 0.09 sen/w as of Dec 2024). As a result, the Group’s 9MFY25 CNP margin improved to 10.7%, from 6.3% in the previous corresponding period.

 

Outlook. Recently various RE initiatives have been introduced to accelerate RE ambitions, including LSS5+ with a 2GW quota, the CREAM (lease rooftop) program, the BESS program with a total capacity of 400MW/1,600MWh, and the planned rollout of LSS6, which tentatively in Q2. Assuming a 2GW capacity for LSS6, the combined impact of LSS5 and LSS5+ could translate into an estimated RM17bn in EPCC jobs, significantly expanding order book opportunities for RE EPCC players over the next two years. We believe Solarvest is well positioned as one of the key beneficiaries, premised to its strong track record by completing >1GW, the highest number of installed solar PV systems among peers and consistently securing an average 20% market share in the LSS cycle. As of 31 Dec 2024, Solarvest’s unbilled order book stands at RM877m (71% from LSS, 28% from C&I, and the remainder from others) equivalent to 1.8x its FY24 revenue of RM497.0m.

 

Earnings revision. No change to our earnings forecasts.

 

Valuation. We maintain our BUY recommendation with an unchanged TP of RM2.00 based on sum-of-parts (SOP) and appraised with three-star ESG rating. We believe Solarvest is well-positioned to benefit from government RE initiatives, its unique in-house solar financing, and its status as Malaysia’s largest solar EPCC player.

 

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

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