KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB) said job flows from the Corporate Green Power Programme (CGPP) are anticipated to boost order books and propel earnings growth for the renewable energy industry.
HLIB anticipates that contract flows from CGPP for construction and commissioning companies (EPCC) will begin in early 2024, since the majority of CGPP projects are anticipated to be operational by the end of 2025.
The firm believes that Solarvest Bhd will emerge as the big winner with its active involvement in 443.4 MW of EPCC quotas valued at an estimated RM1 to RM1.1 billion.
"We estimated that the CGPP programme in its entirety could yield between RM2.7 and 3.0 billion of EPCC contract flows next year, even after factoring in deflationary solar module prices," it said.
While the sector was affected by inflationary costs in 2022, HLIB said key materials like solar modules have exhibited deflationary pricing trends.
Given that contracts are executed on a fixed-price basis, it is expected that the trend will be a boon to ongoing project margins.
"We reckon module prices could remain soft in the near term given lingering overcapacity issues, with the likelihood of a policy response remaining uncertain (price/capacity controls).
"We believe capacity controls are unlikely in view of shifting technology trends.
"We make no changes to our overweight sector rating. We like the sector riding on strong structural themes as well as a positive earnings growth cycle. Key catalysts include contract rollout, fresh renewable energy (RE) quotas, and export news flow," it added.