PETALING JAYA: A combination of moderating solar module prices and the rollout of the large-scale solar 6 (LSS6) programme with a mandatory battery energy storage system (Bess) is expected to generate interest in utility-scale solar activity in the second quarter of financial year 2026 (2Q26), says Kenanga Research.
The research house said the LSS6 programme “is likely to be rolled out in 2Q26, with awards expected in late 2026 or early 2027, in line with the historical six-month tender process”.
It sees the programme as the next major catalyst in the renewable energy (RE) industry, with a target allocation of two gigawatts and mandatory Bess integration, as well as RM8bil in engineering, procurement, construction, and commissioning (EPCC) opportunities.
This represents a 40% to 50% increase from solar-only installations, as batteries account for the majority of the additional component cost.
“While competition is expected to intensify as more players enter to capture a share of the market, we believe existing leading players, particularly those with strong balance sheets, are better positioned to emerge as winners,” it noted.
Kenanga Research has maintained an “overweight” call on RE stocks, with “outperform” recommendations for Samaiden Group Bhd
at a target price (TP) of RM1.94 and KJTS Group Bhd at a TP of RM1.37.
Solar module prices have come down, driven by easing raw material costs – including declines in polysilicon and wafer prices, as well as the normalisation of silver prices – which will help to gradually improve EPCC rollouts.
“This presents a potential upside for EPCC contractors that have yet to lock in panel procurement under fixed-price contracts. Developers seeking improved returns may expedite EPCC contract rollouts should module prices moderate,” it said.
“EPCC rollouts have been slow to date, mainly due to delays in financial closes as developers adopt a wait-and-see approach amid previously elevated panel prices.
“This followed China’s 9% export value-added tax removal, which has compressed project internal rates of return,” it added.
To date, only 1.5% of the EPCC value has been publicly announced, with Solarvest Holdings Bhd’s contract valued at RM90mil, pointing to a slower pace of conversion.
An estimated RM2bil to RM3bil worth of projects over the next 12 months should continue to support the earnings of RE players through to 2028.
“As such, we expect incumbent players such as Solarvest and Samaiden to be key beneficiaries, given their established track records in utility-scale projects and stronger balance sheet positions,” it said.
