The target price represents a potential return of 38.2% over the current price of 55 sen (at the time of writing) and based on a FY2024 forecasted earnings-per-share (EPS) of 5 sen and price-earnings ratio (PE) of 15.2 times, in line with the average of its peers.
It previously had a target price of 60 sen. “We revised our revenue and profit forecasts for FY2023F and FY2024F due to recent contract wins and higher order book replenishment assumptions,” the research house said in a note today.
The buy call is backed by Sunview’s attractive growth prospects in solar photovoltaic (PV) installation demand, driven by the government’s roadmap to achieve 31% and 40% renewable energy (RE) generation mix by 2025 and 2035 respectively.
The research house also finds Sunview, which offers residential, commercial and large-scale solar power solutions, to be well-positioned to expand from its existing market share of 4%.
Under the leadership of its CEO Ong Hang Ping, who has more than 12 years of experience in the RE industry, Sunview recorded a compound annual growth rate (CAGR) of 159.9% in the last three years, from 2019 to 2022.
Mercury Securities listed three key risk factors: change in government policy, competition from other RE generation methods, and an inability to secure new projects.
A rosy second half of 2023
Nevertheless, the research house paints a positive picture for the second half of FY2023, with higher revenue from its existing order book, and improved margins from declining raw material costs.
Sunview’s latest order book of RM765.6 million is expected to be fully recognised by FY2024.
Last month, it bagged a RM122 million engineering, procurement, construction and commissioning (EPCC) contract from Nextenaga Sdn Bhd to undertake the development of a 29.99-megawatt solar PV plant in Bukit Badong, Selangor.
The company has completed 104 EPCC of rooftop solar projects as of Q2 FY2023, with a cumulative installed capacity of 23.90 megawatts. It also completed 22 other projects with a total contract value of RM38.3 million.
Sunview has plans to expand into other RE facilities such as biogas plants and target industrial applications of solar power in the southern regions of Malaysia.
At the close of trading today, its share price fell 1.5 sen to 54 sen, giving it a market capitalisation of RM250.38 million.