Solarvest Holdings Berhad - Within Expectations
Thu, 21-Aug-2025 07:43 am
by Tan Sue Wen, Ong Tze Hern • Apex Research

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SLVEST (0215)

Target Price (RM)

2.61

Recommendation

Buy

  • SLVEST’s 1QFY26 CNP came in within expectations at RM16.9m (-29.2% QoQ, +108.3% YoY), accounting for 24% of our projection and consensus full-year estimates. The QoQ decline was mainly due to slower progress recognition under CGPP projects and the delayed commencement of new projects.

  • We believe near-term order book replenishment remains robust, primarily fuelled by LSS5, where EPCC contracts are typically awarded about six to nine months after project developer appointment. We also expect the execution timeline to be accelerated to meet the official COD deadline for LSS5 projects by end-2027. YTD, SLVEST has secured c.26.7% EPCC market share under LSS5.

  • Solar module prices currently hover around USD0.09/W and could trend higher towards year-end as China enforces its “anti-involution” policy to curb oversupply. Together with the introduction of SST, this may add to cost pressures, particularly for upcoming LSS5 and LSS5+ projects. That said, the continued strengthening of the MYR is likely to cushion part of the impact, mitigating some of the margin pressure.

  • As of 30 June 2025, SLVEST’s unbilled order book stood at RM1.2bn, equivalent to 2.2x its FY25 revenue.

  • Maintain a BUY recommendation with an unchanged TP of RM2.61, based on a SOP valuation and a three-star ESG rating.

 

Within expectations. After adjusting for forex losses (+RM1m), SLVEST’s 1QFY26 core net profit (CNP) of RM16.9m was in line with expectations, representing 24% of both our projection and consensus full-year forecasts.

 

QoQ. CNP declined by 29.2%, primarily due to weaker contributions from the EPCC division, where the segmental PBT contracted by 18.9% on the back of slower progress recognition under CGPP projects and delayed commencement of new projects. Despite this, segmental margins expanded by 1.6%-pts to 10.5%, which we attribute to favourable FX movements (average USD/MYR of 4.31 in 1QFY26 vs. 4.45 in 4QFY25, representing a ~3.1% appreciation of the MYR) which lowered project costs, as well as a more favourable product mix, driven by front-loaded demand from the SELCO programme ahead of the BESS requirement prior to the end-2025 deadline. Additionally, the “Others” segment turned to LBT of RM0.9m from PBT of RM1.6m, which we attribute to lower demand for environmental commodities trading.

 

YoY. CNP surged by 108.3%, driven by improved performance from EPCC, O&M, and RE Generation divisions. Notably, the EPCC division’s PBT more than doubled, driven by ongoing execution of CGPP projects. By comparison, contributions in 1QFY25 were weighed down by the tail-end of LSS4 projects, which carried thinner margins.

 

Outlook. We expect SLVEST to deliver robust earnings in the coming quarter, supported by revenue recognition from CGPP projects that are scheduled to achieve COD by end-2025. Near-term orderbook replenishment is likely to come from LSS5, where EPCC contracts are typically awarded to contractors about six to nine months after the LSS awards to developers, once financial close has been achieved. That said, we believe the execution window will be accelerated to meet the official COD deadline for LSS5 projects by end-2027. YTD, SLVESThas secured c.26.7% LSS5 EPCC market share.

 

Beyond this, LSS5+ is expected to anchor the next phase of contract flows, in line with the targeted COD timeline of 2027. The government’s issuance of the MyBeST RFP in May 2025, also slated for commercial operation in 2027, provides a meaningful medium-term catalyst, with a total tender size of c.RM2bn for 400MW/1,600MWh (each 100MW project valued at up to RM500m). Backed by its proven track record in both LSS projects, we believe SLVEST is well-positioned to emerge as a front-runner in the bidding process. On the risk side, solar module prices currently hover around USD0.09/w and could trend higher towards year-end as China enforces its ‘anti-involution’ policy to curb oversupply. Coupled with the introduction of SST for contract value exceeding RM1.5m within a 12-month period, this could add to cost pressures particularly for upcoming LSS5 and LSS5+ projects. Nevertheless, we believe the continued strengthening of the MYR is likely to cushion part of the impact, mitigating some of the margin pressure.

 

Orderbook. As of 30 June 2025, SLVEST’s unbilled order book stands at RM1.2bn (77.6% from LSS, with the remainder from C&I and others), equivalent to 2.2x its FY25 revenue.

 

Earnings revision. No change to our earnings forecasts.

 

Valuation. Maintain a BUY rating on SLVEST with an unchanged TP of RM2.61, based on a SOP valuation and a three-star ESG rating. We believe SLVEST is well-positioned to capitalise on government renewable energy initiatives, thanks to its unique in-house solar financing and its position as Malaysia’s largest solar EPCC player.

 

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

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