PEKAT’s 3QFY25 CNP came in at RM10.3m (-6.2% QoQ, +248.6% YoY), bringing 9MFY25 CNP to RM32.5m (+191.7% YoY). The results came in below expectations, at 69% of our FY25F forecast and 72% of consensus estimates. The earnings shortfall was mainly due to weaker-than-expected contributions from the solar rooftop EPCC segment, as demand moderated following the expiry of the NEM 3.0 programme.
Post-results, we have revised our FY25F/FY26F earnings forecasts by -6.2%/-5.6%, reflecting more conservative assumptions for residential and C&I rooftop adoption.
Looking ahead, 4Q earnings are expected to remain muted due to the absence of any rooftop incentive programme from June to December, with the ATAP scheme only launching in December.
Following the earnings revision, we maintain HOLD and lower our TP to RM1.59 (from RM1.68), based on SOP valuation.
Below expectations.PEKAT reported a 3QFY25 core net profit (CNP) of RM10.3m (-6.2% QoQ, +248.6% YoY), lifting 9MFY25 CNP to RM32.5m (+191.7% YoY). The results came in below expectations, at 69% of our FY25F forecast and 72% of consensus estimates. The earnings shortfall was mainly due to weaker-than-expected contributions from the solar rooftop EPCC segment, as demand moderated following the expiry of the NEM 3.0 programme.
QoQ. CNP slipped 6.2%, mainly due to weaker contributions from residential rooftop solar projects within the EPCC segment, reflecting softer demand following the expiry of the NEM 3.0 programme. This resulted in margin contraction, with the Group’s gross margin narrowing by 5.3-pts despite an 11.6% increase in overall revenue. All segments recorded revenue growth. EPCC revenue rose 16.3% driven by stronger progress from utility-scale CGPP projects, ELP segment grew 12.1% on improved project execution, while the Trading segment increased 15.5% on higher sales volume.
YoY. CNP surged 248.6% YoY, supported by a 71.2% increase in revenue and additional contributions from EPE Switchgear. By segment, EPCC revenue rose 33.9%, driven by accelerated revenue recognition from CGPP projects, compared to the same period last year which was dominated by smaller-value rooftop installations. The ELP segment’s revenue climbed 38.4%, and likely delivered stronger earnings, supported by a more favourable product mix, particularly from rising data-centre-related demand, a segment that typically commands premium margins given its shorter execution cycle and higher technical requirements.
Outlook. 4Q earnings are expected to remain muted, mainly due to softer demand for rooftop solar following the expiry of the NEM scheme in June. With the ATAP scheme scheduled only for launch in December, there has been no rooftop incentive programme from June to December, creating a demand gap for residential installations. For the CGPP project, we believe work progress is already at its tail-end as PEKAT works towards meeting the end-2025 COD deadline. The recent increase in Maximum Demand charges, particularly for MV users, may also spur greater interest in installing BESS to hedge peak demand. We believe this will benefit PEKAT, given its strong track record in off-grid solutions and should provide earnings visibility over the medium term. Meanwhile, the ELP segment is expected to remain robust, supported by recent contract wins for data-centre-related projects, which should drive further order replenishment over the medium term in line with ongoing data centre development.
Earnings revision. Post-results, we have revised our earnings forecasts by -6.2%/-5.6% for FY25F/FY26F, reflecting more conservative assumptions for residential and C&I rooftop solar adoption. We have reduced our solar order book replenishment assumption to RM130-160m (from RM150-220m) to account for a more neutral demand outlook in light of recent government policy changes.
Valuation & Recommendation. Following the earnings revision, we have lowered our TP to RM1.59 (from RM1.68), based on our SOP valuation and supported by a three-star ESG rating. Maintain HOLD. We continue to favour PEKAT for its synergistic business model, strong margins in the Power distribution division, and sustainable order book. PEKAT’s strong historical financial results qualify the Group for a transfer to the Main Market of Bursa Malaysia.
Risks. 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 | 4.116196 | 4.147085 |
| EUR | 4.779011 | 4.786244 |
| CNY | 0.583313 | 0.583620 |
| HKD | 0.529202 | 0.533225 |
| SGD | 3.170028 | 3.194008 |