KUALA LUMPUR (Aug 5): CIMB Securities has lowered its core net profit forecasts for YTL Power International Bhd (KL:YTLPOWR) for the financial years 2025 to 2027.

The revision reflects lower expected earnings from its artificial intelligence (AI) data centres and Singapore-based subsidiary Power Seraya.

CIMB cut its core profit forecast for YTL Power by 7% for FY2025, 17% for FY2026, and 16% for FY2027. 

The decline is partly offset by stronger contributions from the co-location (co-lo) data-centre segment and Wessex Water in the UK. CIMB also expects YTL Power to post a 17% year-on-year drop in profit for FY2025.

“Wessex raised its charges on April 1, 2025, with the typical metered bill to rise by 21% year-on-year (y-o-y), exceeding our earlier assumed 13% hike. 

“Thus, we lifted our FY2025–FY2027 core net profit estimates for the company by 38%–52%...”

CIMB said it now expects the water & sewerage segment’s core profit to turn around y-o-y to RM242 million in FY2025F (forecast), then rise 120%/7% y-o-y to RM533 million/RM571 million in FY2026F/FY2027F, respectively.   

Despite the lower earnings outlook, the research house has maintained its “buy” recommendation and raised the stock’s target price (TP) to RM4.55, citing higher valuation for the co-lo data-centre business and a water tariff hike at Wessex Water.

CIMB slashed Seraya’s core profit forecast by 16%–31%, citing lower-than-expected pool and retail electricity prices in the first nine months of FY2025 (9MFY2025). 

It also flagged a quicker rise in fuel costs following the expiry of favourable supply contracts. However, CIMB kept its long-term assumption of SG$60 per megawatt hour, leading to a smaller 14% reduction in Seraya’s fair value.

Meanwhile, CIMB raised its earnings forecast for YTL Power’s co-lo data-centre business after reassessing its earlier margin assumptions. It now assumes a 70% profit margin, up from 50%, and expects YTL Power to begin expanding its capacity, as its existing 188-megawatt (MW) capacity has been fully leased.

For the AI data-centre segment, CIMB revised its forecast downwards. It now expects only 12MW to be deployed for Nvidia’s DGX Cloud, down from 20MW previously. The remaining capacity will likely be used to support YTL Power’s own large-language model ILMU, and other AI offerings.

“For now, we have not factored in any earnings from this, given a lack of visibility. Correspondingly, we have cut our AI DC (data-centre) fair value estimate to 24 sen/share.”

YTL Power’s share price rose nine sen, or 2.2%, to RM4.21 at the time of writing on Tuesday morning, valuing the group at RM35.54 billion.