Summary
SCG posted a record-high core net profit of RM72.3m in FY24 (+145.7% yoy), driven by strong MV and HV cable demand from rapid substation development for solar farms, data centres, and fast-tracked projects under Tenaga’s Green Lane Pathway. As of Dec 2024, orders on hand stood at RM1.28bn (58% orderbook, 42% POs), equivalent to 1.0x FY24 revenue.
To capture growing demand, SCG added 3,000km of new capacity YTD and plans to add another 2,000km by 2HFY25. US sales remained robust, with FY24 exports nearly tripling to RM40m, and management targets RM100m for FY25. Looking ahead, we expect power cable demand to stay strong, supported by national grid upgrades, renewable energy, data centre developments, and US market traction.
We maintain our BUY recommendation with an unchanged target price of RM1.71 based on 18.0x PER applied to FY25F fully diluted EPS of 9.5 sen along with three-star ESG rating.
We came away from SCG’s post 4QFY24 results briefing reassured in our optimistic view on its outlook. Below are the key takeaways:
Record-high earnings in FY24. SCG achieved its highest-ever core net profit of RM72.3m (+145.7% yoy) in FY24, with a CNP margin of 5.4%. This was driven by a surge in orders for MV and HV power cables and wires, attributed to rapid substation development for solar farms, data centres, and fast-tracked projects under Tenaga’s Green Lane Pathway. Moving forward, management expects CNP margins to hover at 4QFY24 levels of 7.5%, underpinned by (i) a better product mix, with c.40% of orders comprising MV, (ii) 3,000 km of newly added capacity, and (iii) sustained momentum in US exports for aluminum-based cables and wires. As of Dec 2024, total orders on hand stood at RM1.28bn, equivalent to 1.0x FY24 revenue, with 58% from long-term order books and 42% from POs.
Strong US export momentum. SCG’s export market especially to the US remained robust, with FY24 sales of c.RM40m, nearly tripling from RM14m in FY23. Monthly container shipments have remained steady at 35–40 containers. For FY25, management is targeting RM100m in US sales, backed by expanded product offerings and capacity allocation. Two new aluminum cable products are currently pending UL Solutions certification, expected to get certified by 3QFY25, which will further widen SCG’s addressable market. With Mexico, Canada, and the EU no longer exempt from US tariffs, we believe SCG’s fully compliant products will become a more competitive option for US distributors seeking cost-effective alternatives.
Capacity expansion. As of FY24, SCG's total production capacity reached 46,980 km/year, operating at 86% utilisation. To address rising demand, 3,000 km of additional capacity was added YTD, with another 2,000 km set to be added in 2H25, bringing total capacity to 51,980 km/year by end-FY25. The expansion primarily targets LV and MV segments, supporting national grid upgrades and export market growth, particularly in the US.
Outlook. We expect power cable demand to remain strong, driven by national grid upgrades, renewable energy projects, construction upcycle, data center booming, and growing US demand. We are informed that Tenaga’s 1+1 tender has been fully awarded, with SCG securing c.20% market share, consistent with previous cycles. Considering Sarawak Cable’s liquidation and Leader Cable being up for sale, we believe SCG is well-positioned to capture any supply gap, especially if these competitors face cash flow constraints that hinder order fulfilment. This could translate into additional upside surprise orders for SCG, particularly in the MV segment, where few sizeable players remain in the field. On top of that, SCG’s 1,600 sqm HV Milliken cables are expected to receive TNB certification by 3QFY25. However, given the specialised nature of these high-specification conductors, we expect sales conversion may take time to materialise, with meaningful revenue contribution likely to commence from FY26 onwards.
Earnings revision. Maintained.
Valuation & Recommendation. We maintain our BUY recommendation with an unchanged target price of RM1.71, applied to an 18.0x P/E based on FY26 fully diluted EPS of 9.5 sen, along with an assigned three-star ESG rating. We continue to like SCG for its (i) role as a proxy for Malaysia’s growing power demand, (ii) increasing demand for HV power cables, and (iii) position as one of the few vendors supplying US distributors.
Risk. Heavy reliance on government initiatives. Inability to secure new contracts. Spike in raw material costs such as copper and steel.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.438795 | 4.472568 |
| EUR | 4.812854 | 4.816325 |
| CNY | 0.611771 | 0.612291 |
| HKD | 0.570562 | 0.574463 |
| SGD | 3.306949 | 3.329359 |