Pekat Group Berhad - Secures RM113.3m TNB Contract; Upgrade to BUY
Mon, 05-Jan-2026 07:45 am
by Tan Sue Wen • Apex Research

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PEKAT (0233)

Target Price (RM)

1.87

Recommendation

Buy

  • PEKAT has secured a RM113.3m two-year contract from TNB via its 60%-owned indirect subsidiary, EPE Switchgear (M) Sdn Bhd, for the supply of 11kV motorised Ring Main Units (RMUs) with interconnector and Remote Control Boxes (RCBs) of various configurations. The award lifts its outstanding order book to RM745.3m (2.6x FY24 revenue).

  • Outlook remains positive, supported by TNB’s RP4 capex plan, under which more than half of total capex is expected to be allocated to distribution upgrades, grid automation and connectivity investments, areas where EPE is well positioned. 

  • No changes are made to earnings forecasts, as the contract win is already captured within the FY26F EPE order-book replenishment assumption.

  • Upgrade to BUY, with a higher TP of RM1.87 (from RM1.68) based on a sum-of-parts (SOP) valuation, supported by a three-star ESG rating.

 

Secures RM113.3m contract. PEKAT, via its 60%-owned indirect subsidiary EPE Switchgear (M) Sdn Bhd, has received a Letter of Award (LOA) from TNB for the supply of 11kV motorised Ring Main Units (RMU) with interconnector and Remote-Control Boxes (RCB) of various configurations. The two-year contract, valued at RM113.3m (inclusive of SST), is effective from 31 December 2025. The contract also requires a performance security of RM5.7m, representing 5% of the contract value.

 

Our Take. We view this as a positive development for PEKAT, as it strengthens the Group’s earnings visibility through FY27F. Assuming a 25% GP margin, the contract is expected to generate c.RM27m in gross profit over the 240-month duration, with c.RM13.5m recognised in FY26 (7.8% of our FY26F forecast) and c.RM13.5m in FY27 (6.9% of our FY27F forecast). With this latest win, PEKAT’s unbilled order book increases to RM745.3m, equivalent to 2.6x FY24 revenue, providing solid earnings support over the next three years.

 

Outlook. We remain positive on EPE’s outlook, supported by TNB’s RP4 capex plan of up to RM42.8bn, with more than half expected to be allocated towards distribution upgrades, grid automation and connectivity-related investments. These initiatives require extensive deployment of RMUs and RCBs, which are critical components in the MV distribution network. EPE is among a limited pool of qualified vendors that meet TNB’s technical, quality and track-record requirements. Supported by over five decades of established relationships with local utility companies, we believe the Group is well positioned to secure repeat utility tenders, underpinning multi-year earnings visibility and enhancement.

 

Earnings revision. No changes are made to earnings forecasts, as the contract win is already captured within the FY26F EPE order-book replenishment assumption of RM250m. Also, we introduced FY27F earnings forecast at RM64.5m.

 

Valuation & Recommendation. We increase the applied P/E multiple on EPE Switchgear to 17x (from 15x) to reflect a more favourable earnings landscape. Following the valuation rollover and P/E enhancement, we derive a higher TP of RM1.87 (from RM1.68) based on a SOP valuation, supported by a three-star ESG rating. Upgrade to BUY (from 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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