SUNVIEW: Solar Firm Reports Significant Loss, Analysts Trim Target Price Amid Financial Strain

A prominent player in the solar PV construction and installation sector has reported a substantial net loss of RM70.3 million for its audited financial year 2025. This marks a significant downturn compared to the RM7.8 million net profit recorded in its unaudited report. The primary cause for this reversal was a substantial RM75 million impairment charge on trade receivables connected to a specific large-scale solar project, following the counterparty’s declaration of PN17 status and subsequent liquidity constraints.

The firm is currently in the process of acquiring the related asset for RM70 million, an asset that was 79% completed before its operations were halted.

Performance Review

AmInvestment Bank maintains a “HOLD” recommendation on the company, revising its target price downwards to RM0.37 per share from the previous RM0.39. This revised target is premised on a CY27F Price-to-Earnings (PE) ratio of 20x, reflecting a discount to the solar EPCC peer average of 22x. This discount is attributed to concerns over the company’s weak profit margins and high operational risks. The bank also adjusted its FY27F net profit forecast downwards by 5.6% due to an anticipated weaker EBIT margin of 7.5%, down from 8.0% previously. Operating expenses are projected to remain elevated due to transitional costs associated with asset acquisitions and mobilisation efforts required to finalise the remaining 21% of construction at a key site.

Operational Highlights and Challenges

Despite the financial setback, the majority of the firm’s active projects boast completion rates exceeding 60%, including significant contracts like a major university project, thereby mitigating immediate impairment risks. However, two projects currently show lower completion rates of 27% and 57%, primarily due to delays in client site readiness rather than credit-related issues.

A significant concern highlighted in the report is the company’s stretched balance sheet. Its net gearing is projected to climb to 184.7% in FY27F, up from 173.9% in FY26F. This increase is primarily driven by additional debts incurred to finance the RM70 million acquisition of the aforementioned asset and a RM55 million purchase of another solar plant. A recently proposed private placement of up to 56.8 million shares, expected to raise RM19.3 million, is deemed insufficient to significantly curb the anticipated surge in net gearing.

Future Outlook

The company continues to demonstrate sustained orderbook momentum. It recently secured a 99.99MW LSS project, which is expected to add RM150 million to its current orderbook. The forecast for the group’s orderbook is to reach RM412 million in FY27F from RM356 million in FY25. Furthermore, the firm holds a robust tender book of RM5.8 billion, with an estimated 25% success rate implying potential contract wins of RM1.5 billion over the next three years. Despite these positive project pipelines, the risks of high net gearing, potential fall in orderbook replenishment, and increasing solar panel prices remain pertinent considerations for its future performance.