Valuation / Recommendation

We recommend a BUY on Sunview Group Berhad with a target price of RM0.76 based on FY24F EPS of 5.0 sen and a PE of 15.2x in line with its peer’s average.

Our target price was revised higher from RM0.60, and we revise our revenue and profit forecasts for FY23F and FY24F due to recent contract wins and higher order book replenishment assumptions.

We like the stock for its attractive growth prospect on the back of an increase in solar photovoltaic (PV) installation demand under the government’s roadmap to achieve a 31% and 40% RE generation mix by 2025 and 2035. With a solid track record and a strong order book of RM765.6m, we think that the group is well- positioned to expand from its existing market share of 4%. The target price represents a potential return of 38.2% over the current price.

Investment Highlights

Proven track record. The company have completed 104 EPCC of rooftop solar PV facility projects as at 2QFY23 ranging from industrial, residential, and commercial buildings with a cumulative installed capacity of 23.90 MWp. The company also completed 22 projects with a total contract value of RM38.3m with a total installed capacity of over 300.0 MWac.

With the leadership of its CEO & ED Ong Hang Ping who has more than 12 years of experience in the renewable energy industry, the company was able to achieve a 3-year revenue CAGR of 159.9% from FYE2019 to FYE2022.

Solid order book. The company recently accepted the RM122m letter of award (LOA) to undertake the EPCC of solar energy facility for development of Nextenaga’s Badong large scale solar photovoltaic in Selangor which will improve its earnings visibility going forward.

With the latest order book of RM765.6m which is expected to be fully recognised by FY24, we think that the company is well-positioned to benefit from cheaper raw material prices and an increase in solar photovoltaic (PV) demand under the Government’s Energy Transition Plan 2021 – 2040 with a target to increase the share of renewable energy in the total installed capacity in Malaysia to 31% in 2025 and 40% in 2035.

Our estimates assume 2HFY23 to be stronger on the back of higher revenue recognition from its existing order book, and improved margins due to declining raw material costs.

Expansion into other renewable energy (RE) facilities. The company plans to leverage on its experience and track record in EPCC of solar PV facilities to venture into the EPCC of other RE facilities like biogas plants which is designed to generate electricity by using waste materials such as agricultural waste. The company also intends to set up a new office to expand its business in Johor to address potential opportunities in the EPCC of rooftop solar PV facilities and target the commercial and industrial applications in the Southern region.

Risk factors. (1) Changes in government policies and regulations relating to power generation, transmission, and distribution. (2) Advancement in technological developments in power generation may result in other more cost-efficient renewable generation methods. (3) Inability to secure new projects.

Source: Mercury Securities Research - 16 Jan 2023