KUALA LUMPUR (Feb 6): RHB Research has recommended that investors take advantage of the recent decline in Solarvest Holdings Bhd's (KL:SLVEST) share price, attributing the weakness to an overreaction to changes in China's value-added tax (VAT) export subsidy.
"Solarvest is now trading at its three-year historical price-earnings mean of 23 times, which we view as a valuation floor given the strong earnings trajectory and robust project pipeline.
"We believe the recent steep sell-off is overdone and more than priced in any concern over changes in China’s VAT export subsidy," said the house.
"We see current levels as an attractive re-entry point ahead of the next growth cycle as the company has secured the 2GW fixed-price panel order and reliable suppliers," said the research house in a note on Friday.
From April 2026, China will remove the 9% export VAT rebate on solar panels and reduce the rebate on batteries from 9% to 6%, with full removal by January 2027.
"We expect to see a 9% increase in panel prices after April," said RHB.
RHB maintained its 'buy' recommendation on the solar engineering company with a target price of RM3.49 from the current price of RM2.42, which implies a 44.2% upside.
According to AskEdge, Solarvest recorded a profit margin of 17.7%, outperforming its peers Samaiden Group Bhd (KL:SAMAIDEN) (8.35%), and Sunview Group Bhd (KL:SUNVIEW) (6.5%), although Solar District Cooling Group Bhd (KL:SDCG) remains the sector leader with a margin of 29.6%.
Solarvest has secured a 2GW blanket panel order at a fixed price for up to 24 months, backed by a dual-deposit structure whereby the company and its supplier post 10% deposits.
The solar engineering company will pass through the higher model procurement cost into new engineering, procurement, construction and commissioning contracts or financial modelling in new binding contracts, which is the industry norm.
"We do not expect further cost pressure on panel price as the polysilicon prices are broadly stable at near US$7 to US$8 per kilogramme," added RHB, indicating any financial impact is partially mitigated by the about 3.2% appreciation of the ringgit against the US dollar.
As of the time of writing on Friday, Solarvest shares stood at RM2.37, valuing the company at RM2.25 billion.