Continue reading this on our app for a better experience

Open in App
Home Capital Broker's Calls

Sembcorp Industries kept at 'add' as electricity spot prices power to 3-year high in India

Stanislaus Jude Chan
Stanislaus Jude Chan • 2 min read
Sembcorp Industries kept at 'add' as electricity spot prices power to 3-year high in India
SINGAPORE (Sept 19): CGS-CIMB Research is keeping its “add” call on Sembcorp Industries with an unchanged target price of $3.49 on the back of higher power demand in India.
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

SINGAPORE (Sept 19): CGS-CIMB Research is keeping its “add” call on Sembcorp Industries with an unchanged target price of $3.49 on the back of higher power demand in India.

Average electricity spot prices in India have surged to a 3-year high on higher demand as a result of retreating monsoon as well as lower hydro and wind power generation, according to analyst Lim Siew Khee in a Tuesday report.

“The overall spot prices were pushed up by aggressive buying from state power distribution companies including Maharashtra, Gujarat and Telangana due to increased demand in the agricultural and industrial sectors given the current dry spell,” Lim says.

In September so far, electricity spot prices have averaged Rs4.13/kwh, and hit a high of Rs6.50/kwh earlier this week.

“If spot prices continue to hover above Rs6/kwh for the remaining weeks of September, we estimate the three-month average spot prices for Jul-Sep to be around Rs4/kwh, similar to the levels in Apr-Jun,” Lim says.

Lim notes that high average spot prices had contributed to a “surprisingly strong” core profit for SCI’s India operations in 2Q18. And the analyst opines that SCI India’s 3Q18 profit could remain impressive.

“Utilisation was lower in Jul and Aug due to maintenance,” Lim says. “However, the latest spike in spot prices could spur SCI to ramp up plant load factor to enjoy the strong spread.”

As at 1.12pm, shares in Sembcorp Industries are trading 10 cents higher, or up 3.4%, at $3.00. This implies an estimated price-to-earnings ratio of 12.0 times and a dividend yield of 3.4% for FY19.

×
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.