Driving energy transition
Strong finish to the fiscal year, BUY
Transferring coverage to Krishna Guha. SCI reported FY23 net profit of
SGD970m, +11% and marginally ahead of MIBG/street. 2H profit of
SGD426m grew 15% YoY. Revenue for 2H fell 14% YoY due to lower power
prices; this was partly offset by higher revenue from renewable and other
business segments. Bottom-line growth was driven by higher EBITDA across
conventional energy and renewables. Renewables capacity is halfway
towards its 2028 target of 25GW. While near-term earnings have likely
peaked, the green transition theme is intact with a de-risked revenue
profile. We reiterate BUY with an unchanged SOTP-based TP of SGD6.30.
Continued growth for renewables segment
Net profit before EI for the renewables segment grew 42% to SGD200m,
from SGD141m in FY22, driven by contributions from acquisitions in China
and India, as well as higher contributions from energy storage and solar
operations in Singapore. FY revenue from renewables grew 40% YoY to
SGD703m while segment adjusted EBITDA grew 45% YoY to SGD601m. Over
the year, SCI secured 4GW of gross renewables capacity through organic
growth and M&As, bringing group’s renewable capacity to 13.8GW, at 55%
of its 2025 target of 25GW. Integrated Urban Solutions revenue fell 6% YoY
to SGD418m due to cessation of a public waste collection contract.
Receding tailwind of elevated power prices
Net profit before EI for conventional energy increased 30% to SGD809m in
FY23 from SGD622m in FY22 driven by higher power prices. However, 2H
saw a slowdown in revenue as power prices came off the peaks
sequentially. During the year, SCI secured multiple PPAs for Singapore
generation assets, enhancing earnings certainty. 62% of the group’s
conventional generation capacity has more than 5 years’ contract tenure.
Likely near-term earnings peak, green theme intact
End of term of operation of Phu My 3 power plant in Vietnam (c. SGD10m
profit impact), maintenance downtime of 2 months for Singapore cogen
(c.50m of profit impact), lower power prices and higher funding cost
should weigh on FY24 earnings with partial offset from higher renewable
revenue. That said, SCI’s de-risked revenue profile (lower merchant risk,
long-term PPAs) and ongoing green transition keeps us on BUY with
relatively unchanged earnings estimate and TP of SGD6.30.
