Solarvest Holdings: Earnings Moderated but Margins Expanded

Solarvest Holdings Berhad’s 6MFY25 results indicate a mixed yet promising performance. Despite the 6MFY25 core net profit (CNP) of RM17.1m achieving only 35.5% of in-house forecasts and 36.7% of consensus FY25F forecasts, analysts remain optimistic about the company’s outlook. This optimism stems from anticipated stronger contributions from CGPP (Corporate Green Power Programme) projects starting from 3QFY25, alongside robust order book prospects.

Solarvest Holdings: Earnings Analysis

Quarter-on-Quarter (QoQ): Solarvest’s 2QFY25 CNP rose by 11.0% QoQ to RM9.0m, underpinned by a 43.0% QoQ surge in revenue. The growth was primarily driven by higher profit contributions from the EPCC (Engineering, Procurement, Construction, and Commissioning) segment, reflecting the start of large-scale CGPP projects.

Year-on-Year (YoY): A 22.8% YoY rise in CNP was observed, attributed to:

1. Increased contributions from LSS4 (Large Scale Solar 4) assets.

2. Cost savings from cheaper solar modules.

3. Completion of LSS4 projects, which yielded lower margins but contributed to top-line growth.

Margins: Despite moderated earnings growth, margins expanded due to improved project mix, particularly in higher-margin commercial and industrial (C&I) projects, and cost efficiencies. The 2QFY25 CNP margin improved to 8.7%, up from 5.2% in 2QFY24.

Outlook

The company’s future prospects remain strong, underpinned by:

1. CGPP Projects: The ongoing rollout of CGPP projects is expected to significantly bolster Solarvest’s earnings from 3QFY25 onwards.

2. LSS5 Developments: With the Government’s imminent announcement of LSS5 winners and continued focus on renewable energy, Solarvest stands well-positioned to benefit.

3. Order Book Strength: Solarvest’s unbilled order book of RM828.3m, representing 1.7x its FY24 revenue, provides robust revenue visibility for upcoming quarters.

4. Cost Tailwinds: Falling solar module costs and improved project execution efficiencies are likely to further enhance margins.

Investment Perspective

Solarvest’s long-term growth trajectory remains intact, supported by Malaysia’s renewable energy ambitions and the company’s strong market positioning. Analysts have maintained a BUY recommendation with a target price of RM1.91, based on a Sum-of-Parts (SOP) valuation. The anticipated growth in CGPP-related earnings, consistent Government support for renewable energy, and expanding overseas pipeline (>2GW) solidify its investment appeal.

Robust project

While Solarvest’s earnings moderated in 6MFY25, its improved margins, robust project pipeline, and favorable policy environment position the company for stronger performance ahead. The commencement of CGPP projects and the potential gains from LSS5 contracts could mark an inflection point, driving sustained earnings growth in FY25 and beyond. Apex

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