Investment Highlights

• Proven track record. With a proven track record of 71.9 MWp capacity installed across residential, commercial and industrial buildings, the Group specialises in provision of customised solar photovoltaic (PV) solutions.
• Expansion of market reach. The Group operates mainly in Selangor (Head Office) and Johor (regional sales office) and plans to establish regional offices in Johor and Pulau Pinang while exploring opportunities in other states.
• Expansion of renewable energy (RE) portfolio. The Group intends to develops, owns and manages a portfolio of solar PV assets to sell electricity to Net Energy Metering (NEM) and Self-Consumption (SELCO) consumers, generating stable revenue and diversifying its income sources.

Company Background

Comprehensive solar PV solutions provider. Operating mainly in Malaysia's solar PV industry, Northern Solar Holdings Bhd (NORTHERN) is principally involved in the engineering, procurement, construction and commissioning (EPCC) of solar PV systems, generation of RE as well as operations and maintenance (O&M) services for solar PV equipment and systems installed in commercial, industrial and residential properties. NORTHERN owns, operates and maintains rooftop solar PV systems that generate and sell the electricity to NEM and SELCO consumers in Peninsular Malaysia.

Industry Landscape

Robust growth in RE sector. The solar EPCC industry in Malaysia is forecast to grow from RM797.0m in 2023 to RM1.5bn in 2026 (CAGR: 23.5%). Growth is driven by Malaysia's solar energy adoption, economic growth, rising electricity demand, urbanisation, increased investments, declining equipment costs and recovery in property markets. (Source: Providence Strategic Partners S/B, from company prospectus)

Valuation 

We derive a fair value of RM1.00, pegging it to ~26x PE multiple based on 2- year +1 standard deviation against its peers of FY26F EPS. We believe the valuation is justified, backed by earnings growth from existing orderbook and tender book. The Group also recorded a strong net profit margin 13-19% against its peers, 2-8% and expects continue to deliver similar margin given lower global solar panel prices.

Key Risks

Key downside risks, among others: i) competition from other industry players,

ii) competition from alternative RE sources and iii) dependency on subcontractors.