PEKAT: Significant Contract Win Bolsters Order Book, Reinforcing Positive Outlook
| Key Information | Details |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The company has started the year on a robust note, securing a substantial contract that significantly bolsters its order book and reinforces a positive outlook from analysts. PhillipCapital has maintained its “BUY” rating, affirming confidence in the company’s future earnings prospects.
Contract Details and Financial Impact
The key driver for this renewed optimism is the RM113.3 million contract awarded by Tenaga Nasional Berhad (TNB) to the company’s 60%-owned subsidiary, EPE Switchgear. This contract is for the supply of 11kV motorized ring main units (RMU), including interconnector and remote control boxes, and is set to span over two years.
This award marks the first contract secured by EPE Switchgear in 2026, elevating the company’s outstanding order book to an impressive RM745 million. This figure represents 2.6 times the company’s estimated FY24 revenue cover ratio, providing strong revenue visibility. The order book is well-diversified, with power distribution accounting for 54%, solar for 25%, electrical and lightning protection (ELP) for 19%, and trading for 2%.
The new TNB contract is expected to contribute a net profit margin of 10-12%, consistent with EPE Switchgear’s historical performance. This would translate to approximately RM7-8 million in profit after tax and minority interest (PATAMI), representing 13-14% of the forecasted PAT for 2026, according to the research report.
Future Outlook and Growth Drivers
Analysts anticipate continued healthy order replenishment across all divisions. The solar segment is poised for growth, supported by the recently announced LSS5+ program and the upcoming LSS6 initiatives. The ELP division is expected to benefit from a robust pipeline of data centre projects. Meanwhile, EPE Switchgear is set to remain a key player within TNB’s supply chain, ensuring a steady stream of business.
PhillipCapital reiterated its “BUY” rating with an unchanged target price of RM1.90. The investment bank remains positive on the company’s earnings prospects, which are expected to benefit significantly from Malaysia’s ongoing renewable energy initiatives.
Key Risks
Despite the strong outlook, the report highlights several key downside risks. These include potential project execution delays, intense market competition, and volatility in solar PV panel prices, which could impact future profitability.
