Malaysia's Utility Sector Poised for Growth in H2 2026, Driven by Renewables and Infrastructure

TA Securities Holdings Berhad is maintaining an 'overweight' rating on Malaysia's utility sector for the latter half of 2026. The firm's positive outlook is underpinned by the ongoing construction of new gas-fired power generation capacity and essential gas supply infrastructure. Furthermore, planned grid expansion projects aimed at supporting the energy transition are also contributing factors.

The firm highlights that the conflict in Iran is acting as a catalyst for diversifying fuel sources within the electricity generation mix. This geopolitical event is accelerating the adoption of renewable energy (RE) and refocusing efforts on developing the ASEAN Power Grid. The conflict could also redirect data center investments from the Middle East to other regions, potentially boosting demand for utility services in Malaysia.

Rising electricity generation costs due to higher fuel prices, including for coal and Stage 2 gas, are making renewable energy more competitive. This trend is expected to stimulate demand for RE as a more cost-effective alternative for consumers. The demand for residential solar power is also anticipated to increase, particularly following the launch of the Sustainable Rebate & Incentive Assistance (SuRIA) Home initiative on June 1.

Under the SuRIA program, domestic users installing solar systems through the Solar Accelerated Transition Action Program (Solar ATAP) before December 31, 2026, are eligible for a rebate of RM600 per 1kWac of installation, up to a maximum of RM3,000 or 5kWac, on a first-come, first-served basis. With a total allocation of RM150 million, the program is expected to support the installation of up to 250MWac of residential solar systems, speeding up rooftop solar adoption despite a lower rebate rate compared to the previous SolaRIS scheme.

TA Securities has identified Tenaga Nasional Bhd (TNB) as its top pick within the sector, with a 'buy' recommendation and a target price of RM18.00 per share. Samaiden Group Bhd (RM1.96) and Malakoff Corporation Bhd (RM1.26) are also recommended. For the water subsector, Ranhill Utilities Bhd (RM2.71) is expected to benefit from increased demand related to data center development and the Johor-Singapore Special Economic Zone (JS-SEZ). Petronas Gas Bhd (RM19.42) is considered a key proxy for the expansion of domestic gas supply infrastructure to support new generation capacity.