HEGROUP: New Solar Contract Reinforces Outlook, Target Price Affirmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.51 (+37.8%) |
| Last Traded | RM0.37 |
| Recommendation |
HE Group (HEG) has announced a significant contract win in the renewable energy sector, securing a RM13.4 million Engineering, Procurement, Construction, and Commissioning (EPCC) contract for a solar photovoltaic energy-generating facility in Johor. This strategic achievement marks HEG’s first major foray into the renewable energy segment, signaling a deeper penetration into green infrastructure initiatives.
The work for this contract is scheduled to commence immediately, with two of the three packages expected to be completed by December 15, 2025, and the final package by February 15, 2026. Despite the relatively modest individual contract value, the short turnaround period is anticipated to provide a timely uplift to the company’s 2025E revenue.
The new contract contributes to HEG’s robust order book, which now stands at RM103.7 million. Year-to-date, new contract wins have totaled RM110.4 million, putting the group well on track to meet its annual replenishment assumption of RM120 million.
Future Outlook
Prospects for HEG remain strong, underpinned by a substantial RM850 million tender book and ongoing expansion plans from its clients in the medical device sector. The company is also seeing increasing traction in both the data centre (DC) and renewable energy (RE) sectors, which are expected to drive future growth.
Valuation and Recommendation
Analysts maintain a “BUY” rating on HEG, with an unchanged target price of RM0.51. This valuation is pegged to a 14x price-to-earnings (PE) multiple on 2026E EPS. The current valuation, at 10x 2026E PER, is considered undemanding, supported by the group’s solid execution track record in semiconductor projects and its growing presence in the DC and RE sectors. The earnings forecast remains unchanged, as this latest contract falls within the existing order-book replenishment assumptions.
Key Risks
Potential risks to the “BUY” call include slower-than-expected replenishment of the order book, unforeseen project delays, and pressure on project margins due to higher costs.
