BMGREEN: Major Solar-BESS Contract Bolsters Future Outlook, Rating Maintained

A leading player in the renewable energy sector has announced a significant contract win, reinforcing its strategic expansion into the burgeoning self-consumption (SELCO) and energy storage markets. The development is expected to provide clearer earnings visibility and potentially higher project margins.

Major Contract Win in Renewable Energy

The company’s wholly-owned subsidiary, Plus Xnergy Services (PXH), has secured two pivotal agreements with Cenergi Aeropolis Renewable Energy Sdn Bhd. These contracts pertain to the development of a 36MWp / 30MWac ground-mounted solar PV plant at KLIA, which will be integrated with a Battery Energy Storage System (BESS) under the SELCO scheme. The combined contract value stands at RM71.8 million, with RM42.8 million allocated for engineering, procurement, construction, and commissioning (EPCC) works, and RM29 million for equipment and materials supply. The project is estimated to be completed within 18 months.

Strategic Significance and Margin Enhancement

This contract marks a positive step for the group, strengthening its foothold in the expanding SELCO and energy storage markets. Analysts anticipate that BESS-integrated solar projects will deliver project PBT margins exceeding the usual 8% typically observed in large-scale utility projects. This particular contract alone accounts for 21% of the FY27E solar segment revenue forecast, significantly enhancing earnings visibility.

While rising solar panel prices may exert short-term cost pressures, the company’s strategic expansion into BESS is expected to help sustain overall margins. Furthermore, the anticipated official rollout of the Solar ATAP replacement programme is expected to alleviate market overhang and stimulate stronger adoption once the NEM3.0 scheme expires in June 2025, contributing to improved solar segment performance in FY27.

Outlook and Recommendation

The investment bank maintains its earnings forecast, noting that this new contract falls within its replenishment assumptions. Consequently, a “BUY” rating is reiterated with a target price of RM2.25, derived from a Sum-of-Parts (SOP) valuation. The bank continues to favor the company due to its compelling growth prospects, substantial addressable market driven by National Energy Transition Roadmap (NETR) initiatives, and its appeal as an ESG-focused energy solutions provider. Key risks to this positive outlook include unforeseen changes in government policies and potential fluctuations in raw material prices.