• BMG’s 6MFY25 core net profit of RM22m (+43% YoY) met our and consensus expectations

• Better contributions from bio-energy and solar energy segments mainly drove the stronger earnings performance

• Maintain BUY rating and SOP-derived TP of RM2.65

Result Met Expectations

BM Greentech (BMG) recorded a higher 6MFY25 revenue of RM229m (+5% YoY), predominantly driven by a more robust solar energy segment (+147% YoY), on a higher number of completed projects, and higher water treatment revenue contribution (+18% YoY). This helped mitigate the bio-energy segment's weakness (-15% YoY) due to a reduction in boiler project deliveries. Nevertheless, EBITDA margin expanded by 4ppt YoY to 16%, driven by improved operating leverage and delivery of higher-margin bio-energy projects in 2QFY25. The higher revenue and better margins drove 6MFY25 core net profit higher at RM22m (+43% YoY), representing 59% and 57% of our and consensus estimates. Overall results align with our expectations, with bio-energy segment margins expected to normalize in 2HFY25.

Stronger YoY Earnings

2QFY25 revenue grew 16% YoY to RM137m, driven by a stronger performance in the solar energy segment, supported by a higher number of completed projects. The water treatment segment also saw 21% YoY improvement due to higher overall project deliveries. These helped offset the weaker bio-energy segment due to reduced boiler project deliveries. EBITDA margin improved by 4ppt to 16% on better operating leverage. As a result, 2QFY25 core net profit surged to a record-high RM14m (+52% YoY).

Maintain BUY and TP of RM2.65

We make no changes to our earnings forecast and reiterate our BUY rating and SOP-derived target price of RM2.65. We continue to like BMG for its compelling growth prospects, sizeable addressable market driven by NETR initiatives and appeal as an ESG-focused energy solutions company. Key risks to our BUY call include unforeseen changes or delays in government policies and raw material price fluctuations.

Source: Phillip Capital Research - 25 Nov 2024