Within expectations. Pekat Group Berhad's (Pekat) core net profit grew +40.3%yoy to RM4.6m in 2QFY24, lifting its cumulative 1HFY24 core net profit to RM8.3m, an increase of +28.5%yoy. This came in within expectations, making up 47.7% of ours and 46.6% of the consensus' full- year estimates. Revenue during the quarter came in lower by -4.9%yoy to RM56.6m due to delays in some solar projects but higher margin earthing and lightning protection (ELP) jobs negated the impact to the bottom line.
C&I solar projects to pick up pace. Solar PV, the main revenue driver of the group, saw a -22.5% decline in revenue to RM33.2m, partly due to project execution delays that mainly affected its commercial and industrial (C&I) customer segment. We expect these projects to pick up pace in 2HCY24. Revenue from ELP surged +47.1% to RM11.6m while Pekat's trading division generated a revenue of RM11.9m, a +34.8%yoy growth. These were driven by higher project execution rates and higher fulfilled sales orders.
Healthy order book. Pekat's outstanding order book stands at c.RM206.8m, comprising mainly rooftop solar projects. We expect this to grow to about RM320m by 4QCY24 when it secures its Corporate Green Power Programme (CGPP) related EPCC jobs. Recall that all solar power plants under the CGPP have to be completed no later than 2025, unless otherwise approved by the Energy Future order book replenishment prospects will come from LSS5-related EPCC jobs. Its latest job win was a RM21.8m ELP systems job for a hyperscale data centre at the Elmina Business Park.
Upcoming acquisition. Pekat is in the midst of acquiring a 60% stake in Apex Power Sdn Bhd for RM96.0m, which will then give it control over EPE Switchgear (M) Sdn Bhd, a switchgear manufacturer based in Nilai. We reiterate our view that this will synergise well with Pekat's business as products manufactured by EPE such as switchgears and distribution transformers are crucial components of solar photovoltaic (PV) systems. There is a profit guarantee for three financial years by Apex Power that its consolidated profit after tax (PAT) will not be less than RM48m collectively, or at least RM16m annually for FY24-FY26 ending 30th September.
Earnings estimates. We keep our earnings estimates unchanged.
Source: MIDF Research - 22 Aug 2024
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