KUALA LUMPUR: Kenanga Research is positive on Yinson Holdings Bhd’s power purchase agreement (PPA) in Nokh Solar Park in Rajasthan, India, as it reaffirms its commitment to the group’s renewable energy (RE) expansion.
The research house, which has an “outperform” recommendation on Yinson, said this was another step towards the group’s mid-term ambitions of reaching 1GW of RE in two years, and long-term target of 5GW in five years.
The project is also the group’s second in RE following its foray into a 140MW plant in India, giving it a total of of 330MW solar production capacity to date.
Kenanga noted that the tariffs will be significantly lower than its first solar project at a rate of INE 2.25/kWh versus INR4.35kWh, given that this project was awarded four to five years ago.
It added that land costs will be very minimal with infrastructures such as connections to the grid already provided for.
“Based on our back-of-envelope calculations, assuming capex of US$100mil, and earnings before interest, taxes, depreciation and amortisation (EBITDA) margins of 80%, we arrived at an internal rate of return of 11% – indicating similar level of returns between the two projects, ” said Kenanga Research.
The research firm maintained its earnings forecast due to the assumed small impact of the project, and target price of RM6.95 based on 13 times price-earnings on financial year 2022 forecast earnings per share.