BMGREEN: Green Energy Player Holds Steady Amidst Challenges, Stronger Momentum Ahead

A leading green energy solutions provider has reported its 9MFY26 core earnings remained largely flat year-on-year, increasing by a marginal 0.3% to RM36.6 million. While these results were in line with the investment bank’s expectations, they fell below consensus estimates, accounting for 72% of internal projections and 69% of street estimates. Revenue for the period saw a healthy 7% year-on-year growth, reaching RM409 million, primarily driven by robust contributions from its water treatment and solar energy segments.

Performance Review

The strong revenue performance was underpinned by a 32% year-on-year surge in water treatment contributions, bolstered by higher project deliveries. The solar revenue segment also grew by 24% year-on-year, fueled by ongoing CGPP utility-scale solar projects and the full-year consolidation of Plus Xnergy (PXH). However, these gains were partially offset by a 7% year-on-year decline in the bio-energy segment due to reduced production activity.

The company’s EBITDA margin saw a 3-percentage point contraction to 11.2%, largely attributable to a higher mix of lower-margin utility-scale solar projects. Despite stronger top-line growth in solar, the segment’s pre-tax profit sharply decreased by 87% year-on-year to RM1.6 million, impacted by a less favourable project mix and increased debt provisions. The solar division registered a loss before tax of RM1.3 million during 3QFY26, mainly due to subdued residential market activity.

Recent Quarter Rebound

Looking at the third quarter of FY26 in isolation, the company demonstrated a significant turnaround, with earnings soaring 40% quarter-on-quarter to RM13 million. This quarterly improvement was propelled by enhanced profit margins within the bio-energy segment and stronger project deliveries in the water treatment division.

Future Outlook and Recommendation

Looking ahead, the investment bank anticipates a strengthening in earnings momentum for 4QFY26. This positive outlook is primarily driven by an expected rise in demand for advanced water-treatment solutions, particularly for data centres and Battery Energy Storage Systems (BESS). The solar segment is also poised to sharpen its focus on BESS, aiming to offer cost-optimisation solutions such as maximum demand shaving to help clients reduce peak charges and enhance overall energy efficiency.

Given the compelling growth prospects, sizeable addressable market driven by NETR initiatives, and the company’s appeal as an ESG-focused energy solutions provider, the investment bank maintains its “BUY” rating with an unchanged sum-of-parts derived target price of RM2.25. Key risks to this recommendation include unforeseen changes or delays in government policies and raw material price fluctuations.