SUNPOWER GROUP LTD. (SGX:5GD)
Sunpower Group - Strong Finish To 2019, Backed By Robust Growth In Green Investments Segment
- Sunpower Group posted strong revenue and earnings for 2019, led by robust growth in the Green Investments (GI) segment. 2019 net profit was at S$352.2m, exceeding our expectations and forming 120% of our full-year forecasts. The +38.9% y-o-y growth in net profit was driven by the strong performance in the GI segment.
- Continued ramp-up of existing projects for the GI segment will continue to drive revenue and earnings growth in 2020 and beyond.
- We maintain BUY with a SOTP target price of S$0.88.
2019 RESULTS
2019 results exceeded our expectations, driven by Green Investments (GI) segment.
- For 2019, Sunpower Group (SGX:5GD) posted robust annual revenue and net profit at Rmb3,604m (+10.5% y-o-y) and Rmb352.2m (+38.9% y-o-y) respectively. 2019 net profit exceeded our expectations, forming 120% of our full-year forecast.
- The strong growth in earnings was led by the GI segment’s rapid ramp-up of projects and strong contributions from new projects.
2020 set to see new revenue drivers from GI segment.
- The GI segment posted stellar revenue growth of 57% y-o-y in 2019. This was led by the continued ramp-up of existing projects, portfolio expansion and enhancement initiatives on acquired projects. Sunpower Group is on target to make equity investments of Rmb2.5b in GI assets by 2021.
- Furthermore, projects such as the Xintai Zhengda facility is is nearing completion, expected to start trial production in 1H20 and contribute to 2020 revenue.
Expanding orderbook.
- Manufacturing and Services (M&S) segment’s orderbook sustained at Rmb2.5b as of Jan 20. Sunpower Group continues to have a highly diversified base of high-end customers across the globe, of which 70% are repeat customers.
STOCK IMPACT
COVID-19 has little impact on Sunpower.
- Due to the ongoing COVID-19 epidemic, some of Sunpower Group’s factories were closed for an extended period before only opening in late- February. However, we have learnt that for provinces Sunpower Group’s factories are located in, the provinces were reporting less than 40 new cases a day.
- Also, some factories like the Xinyuan plant were fully operational throughout the epidemic. As 1Q19 is a seasonally weak quarter, we opine that the coronavirus epidemic would have little impact on Sunpower Group’s 1Q20 and overall 2020 earnings.
Expect a strong 2020 from strong contributions of GI plants and continued ramp-up of existing projects.
- Management has earmarked the GI segment as the key driver for the group. We expect the:
- full-year contributions from newly-acquired GI plants,
- anticipated additional contributions from Shantou Phase 1 and Xintai Zhengda’s new plant,
- continuous connection of new customers following mandatory closures of small dirty boilers and/or mandatory relocation into industrial parks; and
- strong M&S order book of Rmb2.5b to help drive earnings for 2020 and beyond.
EARNINGS REVISION/RISK
- We revise our EPS forecasts slightly while adding our 2022 forecasts.
- Risks include:
- higher leverage from expansion,
- project execution risk, and
- forex.
VALUATION/RECOMMENDATION
- Maintain BUY and a higher SOTP-based target price of S$0.88 (previously: S$0.85).
- See Sunpower Group Share Price; Sunpower Group Target Price; Sunpower Group Analyst Reports; Sunpower Group Dividend History; Sunpower Group Announcements; Sunpower Group Latest News.
SHARE PRICE CATALYST
- Faster-than-expected ramp-up of GI projects.
- Higher-than-expected project wins for M&S segment.
- More EPS-accretive acquisitions.
John Cheong
UOB Kay Hian Research
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https://research.uobkayhian.com/
2020-03-02
SGX Stock
Analyst Report
0.88
UP
0.830
