Nextpower (NXT) and the Strategic Value of the Nextpower Arabia Joint Venture

Nextpower (NXT), a leader in solar tracking technology, has positioned itself at the forefront of the global renewable energy transition. However, its recent strategic partnership with Abunayyan Holding to form Nextpower Arabia-a joint venture targeting the Middle East and North Africa (MENA) solar market-could redefine its valuation trajectory. With a $88 million investment in equity and debt financing over two years, the joint venture aims to establish a 12 GW annual manufacturing facility in Jeddah, Saudi Arabia, by Q2 2026. This initiative not only aligns with Saudi Arabia's Vision 2030 but also addresses critical industry challenges, such as supply chain localization and cost efficiency. The question now is whether this expansion justifies a re-rating of Nextpower's valuation and unlocks long-term shareholder value.

Financial Performance and Strategic Expansion

Nextpower's FY2026 financial results underscore its robust growth. Q2 revenue reached $905 million, a 42% year-over-year increase, while adjusted EBITDA hit $224 million, up 29% YoY. The company raised its full-year revenue guidance to $3.275–$3.475 billion, reflecting confidence in its core solar tracking business and emerging markets. Analysts project a 14% compound annual growth rate through 2028, with revenue expected to reach $4.35 billion.

The Saudi joint venture adds a new dimension to this growth. By localizing production in Jeddah, Nextpower Arabia aims to reduce reliance on imported components, a critical factor in Saudi Arabia's push for 45% local content in photovoltaic systems by 2028. The 12 GW annual capacity of the facility-enough to power millions of homes-positions Nextpower to capture a significant share of Saudi Arabia's $49 billion solar market by 2030, which is projected to grow at a 42% CAGR. This expansion also aligns with the broader MENA solar capacity forecast, which anticipates exceeding 180 GW by 2030.

Valuation Metrics and Market Position

Nextpower's current valuation appears undervalued relative to industry benchmarks. The stock trades at a price-to-earnings (PE) ratio of 22.34x, significantly below the Electrical industry average of 31.62x and the broader peer group average of 38.07x. A discounted cash flow (DCF) analysis further suggests an intrinsic value of approximately $100.53 per share, implying a 13.7% undervaluation relative to its current price.

The joint venture could amplify these valuation metrics. By reducing production costs and accelerating project deployment in the MENA region, Nextpower Arabia is poised to boost both revenue and EBITDA margins. For instance, the 12 GW facility is expected to create 2,000 jobs and enhance local engineering capabilities, directly supporting Saudi Arabia's industrialization goals. This operational scalability could drive higher EBITDA contributions, particularly as Nextpower's non-tracking business lines-such as software and electrical components-are projected to grow from $545 million in 2026 to $1.66 billion by 2030.

Strategic Implications and Long-Term Value

The joint venture's strategic value extends beyond financial metrics. By anchoring Nextpower as a key player in Saudi Arabia's $49 billion solar market, the partnership mitigates risks associated with global policy uncertainties, such as the U.S. One Big Beautiful Bill Act (OBBBA), which complicates tax credits and permitting. Localized manufacturing also insulates the company from supply chain bottlenecks, a persistent challenge in the solar industry.

Moreover, the joint venture's alignment with Saudi Vision 2030-particularly its focus on economic diversification and renewable energy-creates a durable competitive advantage. The National Renewable Energy Program (NREP) aims to achieve 50% renewables in Saudi Arabia's energy mix by 2030, with 40 GW from solar PV alone. Nextpower Arabia's 12 GW capacity directly supports this target, ensuring long-term demand for its products.

Conclusion: A Re-Rating Justified?

Nextpower's current valuation discounts its potential to capitalize on the MENA solar boom. With a strong balance sheet $845 million in cash, no debt and a $5 billion backlog of orders, the company is well-positioned to scale its operations. The Nextpower Arabia joint venture, with its $88 million investment and 12 GW capacity, represents a catalyst for re-rating. By reducing costs, enhancing local content, and securing a leadership role in Saudi Arabia's renewable energy transition, the joint venture could drive revenue growth beyond current projections and justify a higher PE multiple.

For investors, the key takeaway is clear: Nextpower's strategic expansion into Saudi Arabia is not merely a geographic diversification play but a transformative move that could unlock substantial shareholder value over the next five years. As the solar industry's CAGR accelerates and Nextpower's EBITDA margins stabilize, the company's valuation is likely to reflect its growing influence in one of the world's most dynamic renewable energy markets.