<News Alert> Positive Profit Alert
· Guiding 1H to be materially higher y-o-y, ahead of street expectations
· A defensive play; solid execution and growing renewable footprint to further propel share price
· We currently have a BUY call. Earnings and TP of S$3.20 under review
1H recurring profit to be materially higher y-o-y. Sembcorp Industries (SCI) issued a positive profit alert for 1H22, guiding profit to be materially higher y-o-y. We clarify with company, the reference point is recurring profit of S$252m (pre-exceptional loss of Chongqing plant of S$206m) in 1H21. It appears that SCI could deliver >S$300m profit in 1H22, much better than street expectations of S$250-300m. The strong performance was driven by Conventional Energy segment, especially in Singapore and India.
Multiple re-rating catalysts. While stock has outperformed market. We believe the continuous progress of renewable strategy warrants further re-rating. Decarbonisation initiatives such as divestment of coal-fired power plants in China and India could provide another catalyst. Meanwhile, improving supply/demand fundamentals of the power market in Singapore and India boosts near term earnings.
We continue to like SCI as a defensive utility play and proxy to renewable energy. Earnings and TP under review. We currently have a BUY call and TP S$3.20 (1.4x PB)