Kawan Renergy margins set to rebound in Q3

Kuala Lumpur - Kawan Renergy Bhd's profit margins may rebound in the third quarter of 2026, according to analysts at Public Investment Bank Bhd (PublicInvest). The improvement is anticipated as a result of enhanced project execution and cost control measures.

The recent cost overruns at Kawan Renergy's 52MW Sipitang, Sabah power plant project, which impacted earnings in the second quarter of 2026, are seen as largely one-off and project-specific. These overruns were due to additional work beyond the initial scope and increased manpower deployment to address project delays, as reported by PublicInvest analyst Khairul Fahmi.

PublicInvest has maintained a neutral stance on Kawan Renergy with an unchanged target price of RM0.51, pending the company's upcoming results and greater clarity on margin normalization. The firm anticipates a recovery in core profit after tax and minority interest (Patami) in the second half of FY26, forecasting RM7.7 million compared to RM6 million in the first half.

Additionally, Kawan Renergy has been granted approval by the Sustainable Energy Development Authority (Seda) for a 2.5MW biomass power plant under a 21-year Feed-in Tariff arrangement. The plant, set to commence commercial operations in August 2029, will broaden Kawan Renergy's recurring income base. However, its earnings contribution is expected to remain marginal, with an estimated contribution of RM1 million in PAT in its first full year of operation, equivalent to 0.18 sen in earnings per share.