Financial Highlights

The following table sets out the financial highlights based on the company’s combined statements of comprehensive income for Financial Years Under Review and FPE 2025:

• The revenue increased from RM 22 million in FYE 2022 to RM 77 million in FYE 2024, reflecting the company is expanding its market share.
• The gross profit margin continuously rose from 22.7% in FYE 2022 to 27.7% in FYE 2024, primarily driven by an increase in gross profit from the EPCC of solar PV systems.
• The PAT margin decreased from 14.0% in FYE 2022 to 12.9% in FYE 2024.
• The gearing ratio is 0.30 in FYE 2024, which is within the healthy benchmark range of 0.25–0.5, indicating the company maintains a good balance of debt and equity.

Major customers and suppliers

Major Customers

The company’s top 5 major customers for FPE 2025 is as follows:

Revenue contributions from the company Group’s major customers vary annually due to the project-based nature of the business, where revenue depends on the value and progress claims of secured projects. The contracts that the company enters into with the customers are typically less than 12 months, depending on the scale of the project and the scope of services provided. The company may not secure similar contracts in terms of size and scope with the same customers every year. The company is not dependent on Customer A, as the contracts with Customer A is comprises multiple short-term work orders (less than 12 months), while the company also secures EPCC of solar PV systems projects that are similar in value or higher compared to the individual work orders from Customer A.

Major Suppliers

The company’s top 5 major suppliers and/or subcontractors for FPE 2025 is as follows:

The company is not dependent on any other single supplier of products or services such as suppliers of inverters, mounting structures, cables and cable accessories as these products can be sourced from other suppliers. The company will not have to incur any switching costs if they were to purchase solar PV panels or other equipment and materials from other suppliers. This is because the company does not have long-term contracts with its suppliers, which allows them to have the flexibility to source for products and services at competitive prices.

Industry Overview

Electricity is generated from primary energy, comprising non-renewable energy and renewable energy. The selection of electricity production sources and their economic viability can differ based on demand and geography. Both non-renewable energy and renewable energy have their advantages, and can be used in combination to generate and supply electricity to the power grid, and selection is based upon local power requirements and availability of resources.

Malaysia has a mix of energy resources that comprise renewable and non-renewable sources. Malaysia’s non-renewable fossil fuel sources comprise oil, natural gas and coal, while its renewable energy sources include biomass, biogas, solar and hydro. While Malaysia is a net energy exporter, concerns about energy security, fluctuations in crude oil prices and climate change are driving significant changes in how energy and electricity is generated, transmitted and consumed in Malaysia. Energy security refers to the availability of energy sources at an affordable price. Thus, renewable energy resources are becoming attractive for sustainable energy development in Malaysia as these renewable sources of energy are readily available in Malaysia.

Non-renewable energy, extracted from finite resources like oil, gas, and coal, remains a cornerstone of global energy strategies despite its environmental impact. It powers industries and economies by being burned in power plants to generate electricity. In contrast, renewable energy harnesses naturally replenished resources such as sunlight, wind, water, and geothermal heat, offering sustainable and environmentally friendly alternatives. Solar energy, a key renewable source, captures the sun's radiant light and heat through technologies such as solar photovoltaics (PV), solar thermal energy, and solar architecture. These technologies can be active or passive, depending on how they capture, distribute, and convert energy into solar power.

Due to its location around the equator, Malaysia receives approximately 1,575 to 1,812 kilowatt hour per square meter (kWh/m2) of solar irradiance. As solar irradiance is relatively high, solar PV is considered a viable renewable energy option for Malaysia. In addition to favourable irradiation, solar resource is driven by the availability of areas for the installation of solar PV systems. The main types of installation configurations in Malaysia are ground-mounted solar installations, floating installations on water bodies and installations on residential, commercial, industrial and public building rooftops. Installations on residential, commercial, industrial and public building rooftops are rooftop solar PV systems while ground-mounted solar installations and floating installations on water bodies are large scale solar facilities.

The installed capacity of rooftop solar PV systems and large-scale solar facilities in Malaysia increased from 894.0 megawatts (“MW”) in 2019 to 1,933.0 MW in 2022 at a compound annual growth rate (“CAGR”) of 29.3%. Comparatively, the newly built capacity for rooftop solar PV systems and large-scale solar facilities was 349 MW in 2019, 589 MW in 2020, 304 MW in 2021 and 146 MW in 2022 respectively.

The solar PV EPCC services industry in Malaysia, based on the value of EPCC services, has fluctuated between 2019 and 2022. In 2019, the value of the solar PV EPCC services industry was RM838.0 million. The value of solar PV EPCC services rose to a high of RM1.2 billion in 2020 during the COVID-19 pandemic as many homeowners and business owners began switching to solar energy to save on energy costs. In 2021 and 2022, the value of solar PV EPCC services was RM806.0 million and RM664.0 million respectively. For clarity, the value of the solar PV EPCC services industry refers to the value of EPCC services for newly built capacity rooftop installations as well as large-scale solar facilities. PROVIDENCE expects the value of solar PV EPCC services to recover and rise to an estimated RM797.0 million in 2023 at a year-on-year growth rate of 20.0% on the back of Government initiatives to promote the adoption of solar PV systems.

The key drivers in this industry:

• Long-term economic growth supports investments in solar PV systems and facilities
• Population growth and urbanisation promote investments in solar PV systems and facilities
• Decline in equipment and construction costs makes solar PV systems a more favorable renewable energy option

The key risks and challenges in this industry:

• The renewable energy and solar PV industries are dependent on government policies, incentives, and a supportive regulatory framework
• The solar PV industry may not be able to adapt to technological developments and evolving industry standards

Future plans and strategies for NORTHERN SOLAR HOLDINGS BERHAD 

The company’s business strategies and future plans are set out below: 

1. The company intends to scale up its operations with a new corporate office with an engineering command centre
2. The company intends to strengthen its market presence throughout Malaysia
3. The company intends to expand the solar PV systems business to generate recurring revenue
4. The company intends to increase its market share within the solar PV industry in Malaysia

MQ Trader View

Opportunities

1. The company has the expertise and capability to provide customised solar PV solutions
2. The company has collaborations with business partners

Risk

1. The company’s business and financial performance may be affected in the event of delay or inability to complete projects on a timely basis
2. The company’s EPCC projects depend on the timely supply of solar equipment and components at acceptable prices and quality
3. The company is dependent on its subcontractors

Click here to continue the IPO - Northern Solar Holdings Berhad (Part 1)

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