• BUY, SOP-based TP rises to MYR2.00 from MYR1.72, 25% upside. We believe Solarvest is well-positioned to capitalise on Malaysia's ambitious green initiatives, including its commitment to achieving net-zero emissions by 2050 and a 70% renewable energy mix target. With a strong foothold in Malaysia and a growing presence in international markets, the group is well- placed to leverage its platform for further growth. At present, Solarvest is trading at 20x FY26F (Mar) P/E, at about -0.5SD from its 5-year mean.

• Strong EPCC job flows. Solarvest’s EPCC activity rebounded significantly post-pandemic, with FY22-24 EPCC revenue expanding at a 63% CAGR. As of 2QFY25, the group’s MYR961m orderbook reflects a strong solar business growth momentum, comprising MYR675m from utility-scale projects under the Corporate Green Power Programme (CGPP) and MYR286m from the commercial and industrial (C&I) and residential segments. We expect c.50% of utility-scale projects to be recognised in FY25. Looking forward, Solarvest is poised to benefit from the Large-Scale Solar (LSS) 5 initiative, with a projected 20% EPCC win rate, as well as contracting opportunities from the National Energy Transition Roadmap (NETR) and Corporate Renewable Energy Supply Scheme (CRESS) initiatives, further bolstering growth.

• Recurring revenue to support earnings. Solarvest boasts a sizeable asset portfolio, leveraging its early entry into the market since LSS4, where it secured a 50MW capacity (67.3MWp). With its LSS4 plants completed in FY24, we anticipate full contributions in FY25, translating to estimated revenue of MYR20-23m and earnings of MYR7-9m. For CGPP, it secured a total award of 90MW (49.5MWp effective ownership). We expect a comparable earnings profile — or marginally lower — due to higher tariff rates and reduced capex costs, aided by declining solar panel prices. Moreover, the group continues to expand its MW capacity through various initiatives, such as the Powervest programme, further strengthening its market position.

• Strong earnings growth. We project Solarvest to deliver a robust 3-year core earnings CAGR of 26%, supported by recurring asset-based earnings and an abundance of contract opportunities spurred by Malaysia’s energy transition and related initiatives. Our FY25-27 earnings forecasts are +5%, -10% and - 2% vs consensus as we input a more conservative contract win assumption. Our valuation comprises: 30x P/E on FY26F fully diluted EPS, and DCF (WACC: 5.4%) on LSS4 and CGPP solar assets. There is upside risk as we have yet to include its Powervest assets. The TP also includes an 8% ESG premium, given the group’s 3.4 ESG score – above the 3.0 country median.

• Downside risks include slow replenishment of its orderbook, being dependent on government policies and initiatives on RE, competition risks, and unexpected increases in project costs.

Source: RHB Securities Research - 3 Dec 2024