20240201-招银国际-知行集团控股-01539.HK-Emerging_energy_saving_company_expanding_to_Malaysia_and_Middle_East_18页_1mb

Summary of Unity Group (1539 HK) Report

• Company Overview: Unity Group is an integrated energy-saving and management solutions provider, engaged in LED lighting systems and renewable energy project construction. It is listed on HKEX, with operations primarily in Hong Kong, China, Japan, and Indonesia, but growth is focused on Malaysia and the Middle East.

• Key Growth Drivers:

  • Malaysia Market Expansion: Large-scale energy-saving project with LPHS and Odesi Ecob, aiming to install 6mn LED lights for 8,320 condominiums by 2025E, with a contract value potentially reaching HK$6.9bn. Expanded to other Malaysian states and signed agreements with GCH Retail and local partners.
  • Middle East Penetration: Collaboration with Asia JIT Capital and joint venture UME Energy with Ethmar International, targeting solar projects and LED solutions in the UAE and other regions. Market growth driven by supportive policies and increasing demand.
  • Renewable Energy Projects: Strategic partnerships, such as with PowerChina, aiming for 2.6GW capacity with estimated contract value of RMB5.7bn.

• Financial Performance: Post-debt restructuring, financials improved with reduced gearing and stable operations. Forecasts show revenue CAGR of 100% for FY25E-26E in leasing services, driven by Malaysia projects. Core EPS CAGR projected at 1.8x over FY25E-26E, with target price of HK$0.64 based on 100x FY25E P/E.

• Valuation and Recommendations: Analyst initiates coverage with BUY rating and 100% upside to current price. Valuation uses PEG ratio, with target price equating to 1x PEG due to strong growth projections.

• Risk Factors:

  • Currency risk from potential depreciation of Malaysian Ringgit.
  • Interest rate risk from ORIX Finance funding terms.
  • Lack of operating cash flow in early stages.
  • Potential delays in LED light installations due to labor, cash flow or high interest costs.