SUNVIEW: Solar Firm’s Disappointing Earnings Lead to Target Price Revision and Downgrade
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.35 (-5.41%) |
| Last Traded | RM0.37 |
| Recommendation | SELL |
A recent investment bank research report indicates a significant underperformance in a key solar energy player’s latest financial results, leading to a downward revision of its target price and a rating downgrade. The company reported a core net loss of RM0.8 million for its sixth quarter of FY25, bringing its 18-month FY25 core net profit to RM3.9 million. This figure substantially missed analyst expectations, accounting for only 73% of the investment bank’s forecast and 52% of consensus estimates.
Performance Review
The shortfall was primarily attributed to lower-than-expected project margins and a higher effective tax rate. The elevated tax rate stemmed from non-deductible expenses related to banking facility fees and taxes on realized foreign exchange gains. Despite the net loss, the company’s 6QFY25 revenue showed robust growth, rising 37% quarter-on-quarter to RM88 million. This growth was driven by increased contributions from the Corporate Green Power Program (CGPP) and various commercial & industrial (C&I) solar projects, many of which achieved significant progress during the quarter. Core EBITDA margins also saw an improvement, increasing by 2.2 percentage points quarter-on-quarter to 5.1%.
Future Outlook
Looking ahead, the company’s outstanding order book stands at RM173.8 million as of end-September 2025, representing 0.4 times FY24 revenue and 0.5 times 18MFY25 revenue. While the latest results were disappointing, the prospects for order book replenishment remain solid, particularly from utility-scale solar projects. The rollout of an aggregate 2GW LSS5+ projects, where the company aims to secure 100-150MW in EPCC (Engineering, Procurement, Construction, and Commissioning) jobs, is a key positive. Further catalysts include the upcoming LSS6 launch in CY26 and the introduction of the Solar ATAP program in December 2025, which are expected to generate additional EPCC job flows.
Valuation and Recommendation
Following the earnings underperformance, the investment bank has revised its FY26F-27F net profit forecasts downward by 12%-15%, reflecting more conservative project margin assumptions. The bank also introduced an FY28F net profit forecast of RM14.5 million, indicating a 20% year-on-year growth compared to FY27F. Consequently, the target price has been trimmed to RM0.35 from the previous RM0.41, a figure that includes a 3% ESG premium. The valuation continues to peg the company’s CY26F earnings to its historical mean Price-to-Earnings (PER) ratio of 18x. Despite the strong industry growth prospects, the investment bank concludes that valuations are currently stretched at the prevailing share price levels. Given a less favorable risk-reward balance, the recommendation for the stock has been downgraded from Hold to Sell.
