SLVEST: Renewable Energy Firm Reports Strong Earnings Amidst Robust Project Pipeline and Policy Tailwinds

A prominent renewable energy company has announced a significant increase in its core earnings for the first half of fiscal year 2026 (1HFY26), aligning closely with market expectations. This strong financial performance was primarily fueled by the successful execution and recognition of several Corporate Green Power Programme (CGPP) projects and efficient operational management.

Performance Highlights

During 1HFY26, the company’s core earnings surged by 120% year-on-year, reaching MYR37.4 million, which is consistent with approximately 48% of both the investment bank’s and consensus full-year estimates. Revenue for the second quarter of FY26 also demonstrated robust growth, escalating by 63.1% year-on-year and 23% quarter-on-quarter to MYR169.5 million. This revenue growth was largely underpinned by accelerated progress billings for utility-scale CGPP projects and enhanced solar electricity sales from Large Scale Solar (LSS) 4 plants. The quarter’s core profit after tax and minority interest (PATAMI) similarly saw a substantial rise of 120.2% year-on-year and 18.1% quarter-on-quarter, reaching MYR20.3 million. A healthy net margin of around 12% was sustained, attributed to higher-margin contributions from projects nearing completion.

Strategic Outlook and Growth Drivers

The company is on track for another record year, supported by a burgeoning outstanding orderbook that expanded by 12.3% quarter-on-quarter to MYR1.33 billion as of 1HFY26. This significant pipeline comprises 83% utility-scale contracts (CGPP and LSS5) and 17% commercial, industrial, and residential projects. Management’s strategic objectives include further enlarging the orderbook through new LSS5 and LSS5+ packages, while a cumulative 130MWp capacity under its Powervest programme is expected to provide stable recurring revenue and developer profit.

Government initiatives, including the Battery Energy Storage System Programme (MyBeST) and the Self-Consumption Scheme (SELCO), are set to create new growth avenues for the company’s project pipeline. Notably, a recent partnership with Brookfield aims to develop 1,500MWp of renewable energy projects over the next 3-5 years, further solidifying the company’s long-term expansionary trajectory.

Key Risks and Investment Recommendation

Despite the positive outlook, the company faces potential margin compression, particularly if current contracts become subject to expanded Sales & Service Tax regulations. Proactive and vigilant cost management will be critical to mitigate this. Other identified risks include the possibility of weaker-than-expected contract wins, unexpected changes in project costs, reliance on government policies, and competitive pressures.

The investment bank maintains a “BUY” recommendation for the stock, with an unchanged target price of MYR3.49. This valuation is derived from a 30x P/E multiple on FY27F fully-diluted EPS and a discounted cash flow (DCF) valuation for solar assets, incorporating an 8% ESG premium.