KENERGY: Integrated Engineering Solutions Provider Poised for Growth Amid Robust Performance and Strategic Tailwinds

Kawan Renergy (KENERGY), an integrated engineering solutions provider specializing in industrial process equipment, process plants, renewable energy, and co-generation systems, has garnered an “Outperform” rating from an investment bank, which initiated coverage with a target price of RM0.76. The positive outlook stems from the company’s robust financial performance, strategic market positioning, and strong capabilities in Malaysia’s evolving energy transition landscape. KENERGY has expanded its operations to include power generation and precision machining, reinforcing its position as a comprehensive solutions provider.

Financial Performance Highlights

The company demonstrated significant financial growth, with revenue expanding at a solid Compound Annual Growth Rate (CAGR) of 23.4% from RM48.8 million in FY20 to RM113.1 million in FY24. While revenue peaked at RM139.2 million in FY22 before a temporary dip in FY23 due to project milestones and lower industrial equipment orders, it resumed growth in FY24 driven by new project ramps.

EBITDA saw an even more robust CAGR of 44.3%, rising from RM6.8 million in FY20 to RM29.3 million in FY24, with margins steadily improving from 13.8% to 25.9%. Core net profit (PATAMI) followed suit, increasing from RM4.4 million in FY20 to RM18.0 million in FY24, reflecting a 42.2% CAGR and net margin improvement from 9.3% to 16.3%. This profitability trend underscores KENERGY’s successful transition from a pure equipment fabricator to an integrated provider of complex process and energy solutions. The company has also maintained a net cash position since 2020, indicating disciplined capital management.

Key Growth Drivers

The impressive financial trajectory is attributed to several factors. Internally, KENERGY has benefited from tighter cost control and efficiency gains derived from its in-house design and fabrication capabilities, enabling effective management of material usage, project scheduling, and subcontracting. The company’s strategic shift towards higher-value Engineering, Procurement, Construction, and Commissioning (EPCC) works and energy-related projects has also bolstered margins.

Externally, KENERGY is well-positioned to capitalize on structural tailwinds from Malaysia’s energy transition initiatives. The National Energy Transition Roadmap (NETR), combined with rising electricity demand, particularly from data centers, and global decarbonisation pressures, creates sustained demand for its specialized industrial equipment and co-generation systems. Its role as an authorized representative for Solar Turbines gas units and a system integrator for Rolls-Royce MTU diesel generator sets further strengthens its market position in providing alternative power solutions.

Future Outlook and Potential Headwinds

Looking ahead, KENERGY’s unbilled orderbook of RM112.0 million as of 3QFY25, predominantly comprising energy projects, provides a stable base for near-term earnings. The investment bank forecasts revenue to grow from RM113.1 million in FY24 to RM164.4 million by FY27F (CAGR of approximately 13.3%), with core PATAMI projected to increase from RM18.4 million to RM29.4 million over the same period (CAGR of approximately 17.4%). These projections are supported by the continuous tender opportunities arising from national energy policies and industrial demand.

However, the company faces inherent risks, including the project-based nature of its earnings visibility, which depends on securing new tenders, and the potential impact of raw material price volatility, particularly for steel, which constitutes a significant portion of its costs. Despite these challenges, margins are expected to remain resilient, supported by a favorable project mix and in-house engineering capabilities.