Investment Highlights

• We maintain HOLD on Solarvest Holdings with an unchanged fair value of RM1.55/share, pegged to a fully- diluted FY25F PE of 25x, which is the 2-year average. We attach a neutral 3-star ESG rating to Solarvest.

• On an annualised basis, Solarvest’s 1QFY25 net profit was within our forecast and consensus estimates.

• Although the group’s revenue plunged by 49.3% YoY to RM72.7mil in 1QFY25, net profit rose to RM7.8mil from RM6.7mil in 1QFY24. The improved performance was driven by a lower effective tax rate, high-margin commercial and industrial (C&I) solar projects and stronger earnings from the sale of electricity division.

• Even though revenue of the EPCC division slid by 49.1% YoY to RM71.6mil, EBIT only eased to RM9.2mil from RM11.1mil in 1QFY24. EBIT margin expanded to 12.9% in 1QFY25 from 7.9% in 1QFY24, supported by commercial and industrial projects, which command higher margins. Revenue of the EPCC division fell in 1QFY25 as LSS4 projects have been completed.

• EBIT of the sale of electricity division rose to RM5.7mil in 1QFY25 from RM0.6mil in 1QFY24 as LSS (large scale solar) assets have commenced operations. Solarvest owns 3 LSS assets in Selangor and Perak with a total capacity of 67.3MWp. EBIT margin of the division was 87.1% in 1QFY25 vs. 80.2% in 1QFY24.

• Solarvest’s unbilled order book rose to RM469mil as at end-July from RM242mil as at end-March. These will be progressively recognised in FY25F and FY26F. We believe that most of the jobs are CGPP (Corporate Green Power Programme) projects.

• The group plans to bid for ownership of LSS5 projects and secure EPCC contracts from winners of LSS5. We believe that the winners of LSS5 would be announced in 1Q2025.

• Solarvest’s effective tax rate declined to 25.9% in 1QFY25 from 30.1% in 1QFY24 due to a drop in deferred tax expense.

• Solarvest is currently trading at a fully-diluted FY25F PE of 25.6x, which is in line with its 2-year average.

Source: AmInvest Research - 2 Sep 2024