Sembcorp Industries - UOB Kay Hian 2023-03-14: Energised For The Next Phase Of Growth

• Sembcorp has provided a bullish business outlook for 2023 and beyond. Near-term catalysts for Sembcorp's share price include further M&A for renewables assets and an upward adjustment of the company’s targeted gross installed capacity for its renewables segment.
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• Maintain BUY. Upgrade target price for Sembcorp to S$4.64.

Sembcorp Industries (SCI) met with 9 long-only funds during its one and a half day attendance at our ASEAN conference held in Taipei recently.

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• M&A likely in the near to medium term. Sembcorp highlighted that with 9.8GW of renewables (both operational and projects under development), it is close to its stated target of 10GW.
• In our view, Sembcorp is likely to present a higher renewables target to the market in the next few months, with M&A the likely mode of expansion. Sembcorp stated that it prefers targets that are near to or have just started operations, or brownfield projects where it deploys its own operations and maintenance (O&M) in-house instead of outsourcing; as a result it can save around 30% in costs.
• Investors were also keen to hear that the hurdle rate (on a local currency basis) for Sembcorp’s India projects is in the mid-teens while China’s is slightly above 10% IRR.

Hydrogen – a key point of investor interest.

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Adrian LOH UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-03-14 SGinvestors.io

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