SLVEST: Strong Order Momentum and Strategic Expansion Drive Target Price Upgrade

PhillipCapital has reiterated its “BUY” rating on the company, raising its 12-month target price to RM3.80 from RM3.40. This optimistic outlook is fueled by the company’s robust contract win momentum and solid order book, positioning it favorably within Malaysia’s accelerating green energy sector.

Performance Review

The company has demonstrated strong performance, securing RM1.6 billion in contracts year-to-date, significantly surpassing initial replenishment assumptions. Its outstanding order book currently stands at RM1.7 billion, equivalent to 3.2 times its historical FY25 revenue. This order book is diversified, comprising RM1.1 billion from Large Scale Solar (LSS5) projects, RM345 million from Corporate Green Power Programme (CGPP), and RM232 million from residential and commercial & industrial (C&I) segments. PhillipCapital has accordingly revised its new order book replenishment targets upward for FY26-28E to RM2.5 billion, RM1.5 billion, and RM1.6 billion, respectively, from earlier estimates.

Strategic Growth and Future Outlook

The company’s future growth is underpinned by a robust pipeline and strategic initiatives. It is currently tendering for approximately 9.2 GWp of solar projects (8.1 GWp in Malaysia and 1.1 GWp overseas) and 909 MWh of Battery Energy Storage System (BESS) projects, providing substantial medium-term growth visibility. A key catalyst includes a strategic partnership with Brookfield to develop 1.5 GW of solar assets within the next three to five years, potentially generating up to RM3 billion in EPCC revenue. Further upside is anticipated from the finalisation of the EPCC contract for its 20%-owned 470 MW LSS5+ Perak solar project with Malakoff, which could boost the order book to RM2.5-3.0 billion. The company’s recent contract successes in East Malaysia, including a 100 MW solar photovoltaic facility in Mukah, Sarawak, align with Sarawak’s ambitious renewable energy expansion roadmap.

Earnings Adjustments and Margin Outlook

Despite the strong order book replenishment, PhillipCapital has adjusted its FY26-28E earnings forecasts by -1.5%, +4.4%, and +1.0% respectively. This adjustment primarily reflects the backloading of EPCC progress and a slower billing ramp-up, with the bulk of earnings recognition from LSS5 EPCC projects expected in FY27-FY28E. Additionally, the acquisition of Solar District Cooling (SDCG) is expected to contribute RM1.2 million in incremental net profit, based on a 22% equity stake. The report forecasts a normalisation of group Pre-Tax Profit (PBT) margins, projecting a decline to 9.7% in FY27E and 8.4% in FY28E from 14.3% in FY26E, as LSS5 EPCC margins stabilise.

Key Risks

Potential downside risks highlighted in the report include shifts in government renewable energy policy, delays in project execution, intense market competition, and volatility in solar module prices.

Recommendation and Valuation

PhillipCapital maintains its “BUY” recommendation, raising the target price to RM3.80. The revised target price incorporates a higher Price-to-Earnings (PE) multiple of 32x (up from 30x) for the EPCC segment, justified by the company’s proven execution track record and enhanced earnings visibility. The valuation also reflects an improved balance sheet strength and a slightly lower Weighted Average Cost of Capital (WACC). The investment bank views the premium valuation as warranted, given the company’s leading position in the utility-scale solar market and its strong alignment with Malaysia’s national energy transition goals.