• 6MFY25 core net profit grew 19% YoY to RM17m, mainly attributed to maiden contributions from LSS4 solar assets

• Results are broadly within our expectations with RM961m order book to drive stronger 2HFY25 earnings

• Maintain BUY with an unchanged SOP-derived target price of RM2.00

Broadly within expectations

Solarvest recorded 6MFY25 revenue of RM177m (-38% YoY) primarily due to the completion of the LSS4 construction project, with the CGPP projects still in the early stages of execution. Nevertheless, the 6MFY25 EBITDA margin improved to 21% following the commissioning of the LSS4 assets, contributing to a 19% YoY increase in core earnings to RM17m. 6MFY25 core net profit accounted for 35% and 38% of our consensus full-year estimates, respectively. We deem this broadly in line with expectations, as 2HFY25 will likely see a stronger ramp-up in construction recognition from the CGPP projects.

Expect sequential stronger earnings on CGPP project recognition

Solarvest recorded 2QFY25 revenue and core net profit growth of 43% and 18% QoQ, respectively. This was mainly driven by higher construction revenue (+50% QoQ) from the commencement of CGPP projects. However, 2QFY25 EBITDA margin contracted 3ppts to 19% reflecting the lower-margin CGPP contracts. The effective tax rate for the quarter increased to 37% due to losses incurred by certain subsidiaries. The group’s outstanding order book remains healthy at RM961m (2x revenue cover), with 70% comprised of CGPP projects. We remain positive about Solarvest’s order book replenishment prospects, driven by the government’s utility-scale solar program, including the upcoming LSS5 (2GW).

Maintain BUY

We make no changes to our earnings forecast as we anticipate a ramp-up in progress billings for the CGPP projects in the 2HFY25. We reiterate our BUY rating on Solarvest with an unchanged SOP-derived target price of RM2.00, based on fully diluted core FY26E EPS of 7.6sen. We continue to like Solarvest as a dominant player in the solar renewable energy space and are set to benefit from the nation’s RE agenda. Key downside risks include government RE policy changes, project execution delays, intense market competition, and volatility in solar PV panel prices.

Source: Philip Capital Research - 26 Nov 2024