PETALING JAYA: Solarvest Holdings Bhd
is expected to see stronger earnings from the second quarter of its financial year ending March 31, 2027 (2Q27), as the renewable energy group ramps up execution of its large-scale solar 5 (LSS5) and LSS5+ projects.
Kenanga Research said the improvement is expected to follow a softer 1Q, where earnings were affected by the early-stage execution of LSS5 projects and slower progress in commercial and industrial solar works.
In 1Q27, Solarvest’s core net profit declined 24% quarter-on-quarter but rose 20% year-on-year to RM19mil.
The results accounted for 18% and 17% of Kenanga Research’s and consensus financial year 2027 (FY27) forecasts, respectively.
However, the research house deemed the results as within expectations as expects earnings to strengthen in the coming quarters following the progressive ramp-up of engineering, procurement, construction, and commissioning (EPCC) works for LSS5 and LSS5+ projects.
It maintained its outperform call on the stock with a RM3.36 target price (TP).
“The RM2.4bil order book, of which management expects to recognise about 45% to 50% in FY27, should continue to provide solid earnings visibility for the remaining quarters.
“As LSS5 and LSS5+ opportunities have largely been allocated, the near-term order replenishment cycle should mainly come from LSS6 and the Corporate Renewable Energy Supply Scheme,” it said in a report.
Similarly, other research houses are upbeat and sees Solarvest as a key beneficiary of LSS6, given its about 30% market share in the previous LSS cycle.
BIMB Research, which has a RM3.24 TP on the stock, values Solarvest’s EPCC business at 30 times its estimated FY27 earnings and its electricity-generating assets using a discounted cash flow valuation.
It said Solarvest is trading at 26.6 times its estimated FY27 earnings, below its +1 standard deviation level of 30.3 times.
This is a level it “deemed justified given its strong earnings visibility”.
The research house said Solarvest estimates the direct EPCC opportunity from LSS6 at over RM12bil, with the group targeting to maintain a market share of over 30%.
