CGS-CIMB Research Securities is maintaining its “add” call and target price of $2.51 on Sembcorp Industries.

This is expected to give the counter a 36.5% upside from its $1.84 price, analyst Lim Siew Khee writes in a Sep 28 note.

Her target price is based on 15x CY2022 P/E of Sembcorp Industries’ Asian peers’ average.

Lim’s move follows reports from industry sources that Green Wind Infra Energy – a subsidiary of Sembcorp Industries – has secured bids in XI tender tranche initiated by the Solar Energy Corporation of India (SECI).


See: Sembcorp Industries launches Singapore's first sustainable financing framework in energy sector


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Sembcorp Industries bagged 180MW out of the 1,200MW that was up for tender. This amounts to around 11% of its current wind asset capacity.

Priced at Rs.2.69/unit (4.9 cents/unit) the tariffs imposed in the SECI XI tranche is comparable to that in SECI II (Rs. 2.64/unit) and SECI III (Rs. 2.44/unit).

Lim estimates that Sembcorp Industries will rake in a net profit of around $2 - $3 million from this contract. 

In line with this, the company’s renewable power generation assets would now come up to around 3.5 GW.

Going forward, Sembcorp Industries is looking to quadruple the gross installed capacity of its renewable energy from 2.6 GW to 10 GW by 2025.

At present, some 58% of the company’s conventional energy plants are powered by gas, while the remaining are driven by coal.

Most of its power plants are on long-term contracts other than merchant markets driven mainly by spot prices. 

Some of these contracts are with Singapore Sembcorp Cogen (1,219MW), Sembcorp Energy India Project 2 (1,070MW) and Flexible Generation Assets in UK (684MW).

Lim notes that merchant markets have somewhat reflected higher input costs. costs. For instance, the energy price of Uniform Singapore Energy was up by around 68% year-to-date, she explains.

“We believe there is also scope for fuel source optimisation given Sembcorp Industries’ position as a gas importer for both PNG and Liquefied Natural Gas (LNG),” adds Lim.

For now, she notes that a shortage in the supply of coal as well as toughening emissions standards in China have imposed widespread curbs on power usage.

However, given that Sembcorp Industries “took a S$212 impairment for its 49%-owned Chongqing Songzao Sembcorp in Aug 2021,” Lim believes that the impact from the recent power crunch would be minimal.

The company operates another 658MW gas-fired cogeneration plant in China through Shanghai Cao Jing.  The plant sells electricity to the Shanghai Municipal Electric Power Company under an annually-renewable power purchase contract with a cost pass-through mechanism.


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The plant’s steam is also sold to industrial customers through long-term supply contracts. 

Lim points out that “the stock’s valuation is undemanding at 11x CY22F P/E" which is 15x below that of its peers.

As at 2.38pm, shares in Sembcorp Industries were up 4 cents or 2.17% at $1.88.

Cover image: Sembcorp Industries