RHB Research said it expects strong contract flows from the recently announced CGPP winners to replenish Solarvest's order book.
PETALING JAYA: Solarvest Holdings Bhd
is expected to continue growing its order book, capitalising on the imminent award of up to 800MW Corporate Green Power Programme (CGPP) projects and progressive rollout of the projects under the National Energy Transition Roadmap.
According to Maybank Investment Bank (Maybank IB) Research, Solarvest’s unbilled order book stood at RM457mil as of end-June 2023.
RHB Research said in a report on the solar energy services provider that moving forward, it expects strong contract flows from the recently announced CGPP winners to replenish its order book.
The research house emphasised that Solarvest had the first right of refusal to a total of 175MW, equal to about RM525mil, assuming a contract of RM3mil per MW.
The CGPP engineering, procurement, construction and commissioning (EPCC) contracts are expected to roll out by end-2023 or early-2024.
Meanwhile, RHB Research also expects Solarvest’s maiden contributions to its 50MW large-scale solar four (LSS4) assets to come in by the second half of financial year 2024 (FY24), as all three are scheduled to be commissioned by the end of 2024.
It was also noted that under the CGPP, the group via its subsidiaries has won three solar assets under three different consortia with a gross total of 90MW capacity.
RHB Research said the solar plants are scheduled to be commissioned in 2025 and will further add to Solarvest’s current asset portfolio, in line with its strategy of attaining 30% recurring income.
Solarvest had garnered a revenue of RM143.4mil, a 172.3% year-on-year (y-o-y)growth, as well as a core profit of RM6.9mil for the first quarter of FY24 ended June 30, 2023.
The better year-on-year performance was largely driven by the significantly higher revenue on account of higher LSS4 progress.
However, the LSS4 EPCC projects yielded a weaker margin, exacerbated by the previous elevated solar panel costs, which is evident in the y-o-y contraction.
The increase in its core net profit of 43.4% y-o-y was due to higher effective tax rates and interest expense offsetting the higher revenue.
Solarvest’s financial results for the quarter came in within expectations of Maybank IB Research and RHB Research, as well as their consensus full-year forecasts.
Maybank IB Research said it made no changes to its FY24 earnings estimate, but instead increased its FY25 and FY26 earnings estimates by an additional 29% and 21%, respectively, after adjusting for a higher order-book replenishment assumption of RM600mil.
Maybank IB Research has a “hold” call on Solarvest with a new target price (TP) of RM1.40 per share.
RHB Research has maintained its forecast for Solarvest, as it expects earnings to pick up in the subsequent quarters coming from the group’s three solar assets.
It has maintained a “buy” call on the group with a TP of RM1.53 per share based on an unchanged 30 times calendar year 2024 price-to-earnings ratio.
