| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Pekat Group, a prominent infrastructure and renewable energy contractor, has reported a significant surge in its financial performance for the fiscal year 2024. This growth was primarily driven by a sharp increase in solar project execution and maiden earnings contributions from its newly acquired power-equipment business. The company’s revenue climbed by 26% year-on-year to RM287 million, while its profit after tax (PAT) saw an even more robust increase of 61% year-on-year, reaching RM22.7 million.
This strong performance has led to a record order book for the group, currently standing at approximately RM591 million. This figure represents 2.1 times the FY24 revenue and is primarily underpinned by large-scale solar (LSS) and rooftop solar awards, hyperscale data-centre earthing and lightning protection (ELP) contracts (including a notable Google Johor Bahru data-centre project), and substantial switchgear tenders. Totaling RM785 million across its Solar and ELP segments, this robust order book provides substantial earnings visibility through fiscal years 2026-2027.
Future Outlook and Catalysts
Pekat Group anticipates continued margin expansion, buoyed by the scaling of its power-equipment business (EPE Switchgear) and increased volumes in both solar and ELP segments, which are expected to drive operating leverage. Near-term revenue is further supported by the strong execution of engineering, procurement, construction, and commissioning (EPCC) contracts from LSS6, the Solar ATAP program (effective January 2026), and various off-grid projects in Sabah and Sarawak funded by Budget 2026.
Several structural tailwinds are also expected to fuel future growth. These include the mandatory Battery Energy Storage Systems (BESS) for large commercial and industrial (C&I) solar installations, declining battery costs, and the Green Investment Tax Allowance. These factors are set to enhance the economic viability of solar-plus-BESS solutions and create opportunities for local battery assembly. Furthermore, the expected resumption of residential rooftop solar from the first quarter of 2026, which typically yields gross margins of around 30%, is poised to significantly uplift the group’s earnings.
Valuation analysis suggests that Pekat Group is currently undervalued compared to its peers, trading at a forward FY26 P/E of 18.6x. This represents a 19.1% discount to the sector average of 23.0x.
