KUALA LUMPUR (Jan 20): ACE Market-bound Northern Solar Holdings Bhd is expected to continue delivering its above-average net profit margin on lower global solar-panel prices, said PublicInvest Research.
The solar energy installation system expert, whose initial public offering (IPO) application closes on Monday, had a “superior” net profit margin of 13%-19% against its peers’ 2%-8%, the research house said.
“The group is expected to continue to deliver a similar margin on the back of lower global solar-panel prices,” said PublicInvest, who ascribed a fair value of RM1 on the stock, compared with its IPO price of 63 sen.
A spokesperson for Northern Solar explained separately that the group’s higher-than-average profit margin is due to its decision to focus on higher margin segments, namely solar panel installations for commercial, industrial and residential segments.
These are typically rooftop solar under programmes such as net energy metering and self-consumption schemes, rather than focusing on bigger projects like grid-connected large-scale solar (LSS), which brings higher revenue but lower margins, the spokesperson said.
Northern Solar “does not intend to tender for LSS projects at this juncture”, PublicInvest’s note said. The group’s order book currently stands at RM83.2 million, lasting 12 months, with a tender book of RM1.8 billion.
Public Invest’s fair value of RM1 is based on a price-to-earnings ratio (PER) of around 26 times on its forecasted financial year 2026 (FY2026) core earnings per share (EPS) of 3.9 sen, up from the 3.5 sen per share projected by the research house for FY2025.
The IPO price of 63 sen, meanwhile, reflects a historical PER of 24.2 times, based on 2024 EPS of 2.6 sen, when it made a net profit of RM10.09 million, on revenue of RM77.97 million.
The last three years saw a compounded annual growth rate of 80.2% in its net profit, PublicInvest said.
The forward PER multiples compare with forward earnings of its peers, such as Solarvest Holdings Bhd (KL:SLVEST) (20 times FY2026 EPS), Pekat Group Bhd (KL:PEKAT)(20 times), Samaiden Group Bhd (KL:SAMAIDEN)(19 times), and Sunview Group Bhd (KL:SUNVIEW)(16.1 times).
“Post IPO, the group plans to expand its market presence regionally, with new offices in Johor and Penang, and exploring opportunities in other states like Melaka, Perak, Kedah, Perlis and Sabah, to grow its EPCC (engineering, procurement, construction and engineering) and O&M (operations and maintenance) services for solar PV (photovoltaic) systems,” PublicInvest said.
Northern Solar shares are expected to list on Bursa Malaysia on Feb 6 this year.
The group is issuing 67.25 million new shares, or 17% of Northern Solar’s enlarged share capital, to raise RM42.37 million for working capital, office set-up, and to expand into Johor and Penang.
Two shareholders, managing director Lew Shoong Kai and executive director Chew Win Hoe, are also offering a total of 35.6 million shares or 17.8 million each, representing 9% of its enlarged share capital, for a sum of RM22.43 million, or RM11.215 million each.
Post-IPO, Lew and Chew will each hold 30.8% in the company. Other shareholders include Lagenda Properties Bhd (KL:LAGENDA), with a 12.5% stake post-IPO.
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