SLVEST: Renewable Energy Firm Secures Major Contract, Bolstering Earnings Outlook
| Investment Bank | PhillipCapital |
|---|---|
| TP (Target Price) | RM3.40 (+8.3%) |
| Last Traded | RM3.14 |
| Recommendation |
A leading renewable energy player has significantly strengthened its project pipeline with the recent award of a substantial engineering, procurement, construction, and commissioning (EPCC) contract under the Large-Scale Solar 5 (LSS5) programme. This development boosts the company’s outstanding order book to a robust RM1.6 billion, providing clear earnings visibility for the foreseeable future.
Performance Review
The newly secured EPCC contract is valued at RM320 million and pertains to a 99.99MWac solar farm. With this latest win, the company’s year-to-date contract acquisitions have reached RM1.1 billion, placing it firmly on track to achieve its RM1.2 billion full-year order book replenishment target. Analysts project this contract alone could contribute an estimated RM26 million in profit, based on an assumed 8% profit before tax margin for large-scale utility solar projects. This expanded order book is expected to ensure robust earnings visibility through financial year 2028.
Future Outlook and Growth Catalysts
The company maintains a positive outlook, supported by strong project visibility and anticipated catalysts from upcoming LSS6 tenders. These tenders are expected to further bolster the order book and sustain its growth trajectory. Furthermore, a recent 1.5GW joint investment with Brookfield is seen as a key reinforcement of the company’s long-term growth trajectory, enhancing its EPCC earnings potential and expanding its recurring income base. The company is poised to benefit from the nation’s broader renewable energy agenda, solidifying its position as a dominant player in the solar sector.
Risks and Recommendation
Despite the optimistic outlook, potential downside risks include changes in government renewable energy policies, project execution delays, intense market competition, and volatility in solar PV panel prices. PhillipCapital has reiterated its BUY rating for the company, maintaining a 12-month target price of RM3.40. The research house continues to view the company as a preferred sector pick, citing its strong market position and alignment with national renewable energy objectives.
