KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has maintained its “overweight” call on Malaysia’s renewable energy (RE) sector for the second half of 2025 (2H 2025), supported by strong structural themes and a positive earnings growth cycle.
In its Sector Outlook: 2H25 note, HLIB said the sector is expected to benefit from a pipeline of large-scale RE programmes such as the remaining projects under the fifth round of Malaysia’s large-scale solar (LSS5), LSS5+ (2 gigawatts (GW)), the MyBeST programme (Malaysia’s 400 megawatt (MW)/1,600 megawatt hour (MWh) battery energy storage system (BESS) auction), and the upcoming LSS6, for which bids would be called.
“We estimate a potential engineering, procurement, construction, and commissioning (EPCC) value of RM10 billion to RM15 billion, assuming LSS6 has a two-GW capacity,” it said.
The investment bank said that there may be further upside to the estimate as LSS6 may feature BESS integration, which would expand the EPCC addressable market.
It posited that the slew of programme rollouts is expected to drive order book growth in the RE segment over the next 12 months.
The trend of integrating BESS into solar deployments is also seen as a catalyst to boost the EPCC market, it said.
In addition, the bank said that a total of 190 MW in feed-in tariff (FiT) small hydro and bioenergy bids are expected to be called later this year, potentially resulting in EPCC contracts for bioenergy players.
“To this end, we view Solarvest Holdings Bhd’s target of hitting RM2 billion order book in the financial year ending March 2026 as conservative, given its consistent 30 per cent to 40 per cent share in LSS programmes,” it said.
Key catalysts for the sector include contract rollouts, increasing interest in the corporate renewable energy supply scheme (CRESS), new RE quota allocations, and positive export-related news flows.
HLIB said the recent tariff hike for ultra-high voltage customers, including direct currents (DC), would also support CRESS demand, as the economics have now improved beyond just decarbonisation motives.
On risks, the investment bank includes execution challenges, slower-than-expected DC builds, cost pressures, political uncertainties, raw material prices, and labour shortages.
“We maintain a ‘buy’ call on Solarvest with a target price of RM3.18, as the company stands to benefit significantly from the extended RE order book upcycle, driven by large-scale projects and its strong market positioning,” it added. – BERNAMA
