Northern Solar Holdings Bhd (NORTHERN, 0340) will be listed on the Bursa Ace Market today. The company is involved in solar energy specializing in engineering, procurement, construction, and commissioning (EPCC), renewable energy generation, and operations and maintenance (O&M). We project NORTHERN to register core net earnings of RM10.1m and RM14.8m for FY3/25F and FY3/26F. BUY with a fair value of RM0.86, premised on a weighted average 18x PER (in-line with its smaller market cap peers) on FY3/26F EPS.

NORTHERN is expanding its solar PV systems business and increase market share along the way in Malaysia. The plan includes (i) hiring 20 engineers, technicians, and business development executives for geographical expansion, and (ii) purchasing essential materials like solar PV panels and inverters, to expand its order book and drive revenue growth in the EPCC solar PV segment.

The operational expansion in Peninsular Malaysia includes a new corporate office with an engineering command centre for real-time solar PV monitoring. Investments in O&M tools, such as drones and voltage detectors, will enhance system diagnostics, preventive maintenance, and service reliability.

NORTHERN is also establishing new offices and showrooms in Johor and Pulau Pinang to increase accessibility, enhance brand visibility to expand its footprints across the country and fostering long-term partnerships in the growing solar energy market. These expansions align with Malaysia's focus on renewable energy. The rising importance of ESG and government initiatives like the Net Energy Metering (NEM) program, SolaRIS rebates, and SelCo guidelines have positioned NORTHERN as the go-to partner for businesses and homeowners seeking cost savings, sustainability, and reduced carbon footprints.

With Malaysia's solar PV industry projected to grow at 23.5% CAGR (2023-2026), NORTHERN is well-positioned to capitalize on the robust demand. By offering end-to-end solar solutions leveraging on its operational expertise, hence assisting their clients to reap the benefits from government incentives. The company's remaining orderbook of RM83.2m as of Nov 2024 provides earnings visibility over the next 12 months. Underpinned by solid margins, NORTHERN is well positioned to scale-up and compete in Malaysia's booming renewable energy sector.

NORTHERN's solid net cash position ensures financial strength post-listing, supporting long-term growth.

Source: Rakuten Research -

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