Company Coverage
Northern Solar (NORTHERN MK): Wins Another LSS5 EPCC Award; Underpins Earnings Visibility
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
RM1.16
RM1.40
+20.7%
RM1.00
Analyst
Analyst
Highlights
- Northern Solar has secured an additional RM34m utility-scale EPCC contract under the LSS5 programme, underpinning earnings visibility over FY27-28. NS also recently completed its transfer to Bursa’s Main Board on 6 Oct 26.
- Blue-sky scenario: Winning a sizeable CRESS project will lift valuation by RM320m (20x PER; RM18m net profit based on 80% equity stake). This suggests a blue-sky fair value of RM2.20/share within a three-year time frame.
- We maintain our BUY call on the stock with a higher PE-based target price of RM1.40/share, based on 15x PE versus sector average 19x PE. The sector will continue to benefit from strong orderbook with the CRESS accelerated programme and LSS6.
Analysis
- Another LSS5 contract win... Northern Solar (NS) has secured another utility-scale engineering, procurement, construction and commissioning (EPCC) contract under the LSS5 programme valued at RM34m. This marks the group’s second utility-scale project win in the span of a year. The 9.5MWac project is slated for commissioning by 1 May 27, with the bulk of contributions expected to be recognised in FY27 (~80% of contract value). We expect a healthy net margin of 7-9% for the above project.
- …lifting orderbook to a record RM223m. NS commands a record orderbook of RM223m, primarily anchored by its two LSS5 ECC and EPCC contracts (64%), with more contributions from rooftop solar photovoltaic (PV) projects across the commercial and industrial (C&I) (27%) and residential (15%) segments. Moving ahead, the company aims to achieve a steady top-line run rate of: a) RM100m p.a. for C&I solar installation; b) RM60-80m p.a. for the residential segment; and c) 5-10% annual revenue mix from its standalone and bundled battery energy storage system (BESS) projects.
- Strong earnings visibility. With the inclusion of this second LSS5 contract win, we expect NS to deliver a robust full-year FY27 net profit growth of 50% yoy. FY27 revenue is expected to double on the back of: a) RM120m + RM34m LSS5 project execution, b) improving commercial and industrial (C&I) demand as businesses seek to mitigate rising electricity costs, and c) a recovery in residential rooftop solar installations supported by a RM3,000 SuRIA Home rebate. NS derived 85% of its revenue from the C&I segment.
Highlights
- Northern Solar has secured an additional RM34m utility-scale EPCC contract under the LSS5 programme, underpinning earnings visibility over FY27-28. NS also recently completed its transfer to Bursa’s Main Board on 6 Oct 26.
- Blue-sky scenario: Winning a sizeable CRESS project will lift valuation by RM320m (20x PER; RM18m net profit based on 80% equity stake). This suggests a blue-sky fair value of RM2.20/share within a three-year time frame.
- We maintain our BUY call on the stock with a higher PE-based target price of RM1.40/share, based on 15x PE versus sector average 19x PE. The sector will continue to benefit from strong orderbook with the CRESS accelerated programme and LSS6.
Analysis
- Another LSS5 contract win... Northern Solar (NS) has secured another utility-scale engineering, procurement, construction and commissioning (EPCC) contract under the LSS5 programme valued at RM34m. This marks the group’s second utility-scale project win in the span of a year. The 9.5MWac project is slated for commissioning by 1 May 27, with the bulk of contributions expected to be recognised in FY27 (~80% of contract value). We expect a healthy net margin of 7-9% for the above project.
- …lifting orderbook to a record RM223m. NS commands a record orderbook of RM223m, primarily anchored by its two LSS5 ECC and EPCC contracts (64%), with more contributions from rooftop solar photovoltaic (PV) projects across the commercial and industrial (C&I) (27%) and residential (15%) segments. Moving ahead, the company aims to achieve a steady top-line run rate of: a) RM100m p.a. for C&I solar installation; b) RM60-80m p.a. for the residential segment; and c) 5-10% annual revenue mix from its standalone and bundled battery energy storage system (BESS) projects.
- Strong earnings visibility. With the inclusion of this second LSS5 contract win, we expect NS to deliver a robust full-year FY27 net profit growth of 50% yoy. FY27 revenue is expected to double on the back of: a) RM120m + RM34m LSS5 project execution, b) improving commercial and industrial (C&I) demand as businesses seek to mitigate rising electricity costs, and c) a recovery in residential rooftop solar installations supported by a RM3,000 SuRIA Home rebate. NS derived 85% of its revenue from the C&I segment.
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
RM1.16
RM1.40
+20.7%
RM1.00
Analyst
Analyst
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