GUNKUL – Strong earnings growth prospect

We expect GUNKUL to achieve a sector-leading earnings growth of 31% in 2026, supported by a healthy year-end backlog of Bt5-6bn. Growth drivers include government-backed transmission upgrades for EEC, smart grid initiatives, Direct PPA negotiations with data centers, and upcoming PDP2026 power auctions. Backed by a strong net D/E of 0.9x and in-house manufacturing advantages, the company is well-positioned for future bids. We maintain an OUTPERFORM rating with a mid-2027 TP of Bt6.2, based on a DCF valuation (WACC of 7.2%, terminal growth of 3%). GUNKUL remains our sector’s wild card pick.

Key takeaway from meeting. GUNKUL’s management is expected to see further upside from various government measures accelerating the energy transition, including 1) more new engineering, procurement, and construction (EPC) revenue from the expansion and upgrading of power transmission lines, comprising a Bt31bn budget to expand and upgrade transmission systems supporting data centers in the EEC allocated from the Bt200bn decree for clean energy transition, which is expected to see increased smart grid investment along with 1mn rooftop solar units (estimated at Bt150bn in market value), a 10-year transmission improvement budget for 2026-30 of Bt106.2bn, and the construction of various substations; 2) upside from the new power plant auctions following the PDP2026 public hearing on September 8, which are projected to receive cabinet approval by November 2026 and gradually begin auctioning in 2027, with GUNKUL remaining interested in participating especially solar power (historically about 10% market share); and 3) the Direct PPA policy, which will allow more than 2,000MW (representing a market investment of no less than Bt60bn), with GUNKUL currently negotiating with several data center clients. All of these factors are expected to provide further upside for GUNKUL, as most of these projects will be auctioned extensively in 2027, and management expects a backlog at the end of 2026 of Bt5-6bn to further supplement revenue in 2027. As GUNKUL is a local market leader in the power EPC and solar power industries, backed by cost advantages from its in-house manufacturing and a strong financial position (net D/E at 0.9x vs. debt covenant at 3x), GUNKUL is well positioned to win bids for new projects.

The outlook is expected to remain positive in 3Q26; driven by the revenue recognition from its strong backlogs in the EPC and trading businesses as well as upcoming biddings, particularly the construction of solar power from renewable big lot phase 1, government transmission upgrades, and grid modernization projects, we expect higher earnings contributions both YoY and QoQ from its wind farm power plants, which benefit from higher wind speed during 3Q26TD.

Valuation & recommendations. We maintain an OUTPERFORM rating with a mid-2027 TP of Bt6.2, based on a DCF valuation (WACC of 7.2%, terminal growth of 3%). We like GUNKUL, which is positioned to see the sector’s highest earnings growth of 31% in 2026, with continued growth of 12% and 38% in 2027-28 from new projects as Thailand transitions to green energy, along with a new contribution from the Philippines floating solar project, which starts contributing in 4Q27.

Key risks: Lower return on new investments and regulatory changes. Key ESG risk is the social impact from upscaling of its EPC arm.