Sembcorp Industries - CGS-CIMB Research 2022-06-20: For Watt It’s Worth

Sembcorp Industries - For Watt It’s Worth

  • Tariffs for power on the Indian Energy Exchange (IEX) rose to a new yearly average peak of 6.68 Rs/kWh year-to-date, ~29% above the previous peak of 5.19 Rs/kWh in 2014. This is due to an earlier-than-expected and a much hotter summer vs other years as well as higher coal prices. With the allocation of local coal, which is ~200% cheaper than international coal as Apr-22, we expect Sembcorp Industries (SGX:U96) to benefit from the strong e-auction prices.
  • Sembcorp Industries’s conventional energy segment also includes Singapore power and gas. Like IEX prices, Uniform Singapore Energy Price (USEP) prices climbed to an average of S$327/MWh in Jan-Jun 22, surpassing the S$295/MWh average in Jul-Dec 22 and S$95/MWh average in Jan-Jun 22 (+11% h-o-h; +242% y-o-y). Energy Markets Authority (EMA) expects high gas prices to persist with the protracted conflict in Ukraine as well as the seasonal increase in energy demand. We expect spark spread for Sembcorp Industries’s Singapore power to surge on the back of this. We expect a full year contribution of strong profits from Sembcorp Cogen in FY22.
  • We previously assumed 15% y-o-y decreases in Sembcorp Industries's FY22F revenue and net profit for conventional energy (CE) as FY21 was an abnormal peak year. However, we now raise our FY22F revenue and net profit for CE by 27%, on consistently high IEX tariffs and USEP prices. We also up our profit for renewable energy (RE) by 10% to reflect the contribution of newly acquired associate SDIC New Energy from Feb 22. This is offset by lower growth for integrated urban solutions on weaker land sales from China.
  • Accordingly, we lift our FY22F-24F EPS forecast for Sembcorp Industries by 7-19%. We raise our target price for Sembcorp Industries to S$3.66, still based on sum-of-parts valuation with an implied P/E of 12.7x FY23F P/E, still a shade below regional peers of ~13x FY23F P/E.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LIM Siew Khee CGS-CIMB Research | Izabella TAN CGS-CIMB Research | 2022-06-20
SGX Stock Analyst Report ADD MAINTAIN ADD 3.66 UP 2.960

Read also CGS-CIMB's most recent report:
2022-11-18 Sembcorp Industries - Acquiring More Solar & Wind Assets For ~s$204m

Target prices by 4 other brokers at Sembcorp Target Prices.
Listing of broker reports at Sembcorp Analyst Report.

Relevant links:
Sembcorp Share Price History,
Sembcorp Announcements,
Sembcorp Dividends & Corp Actions,
Sembcorp News Articles


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