Sunpower Group - UOB Kay Hian 2020-03-02: Strong Finish To 2019, Backed By Robust Growth In Green Investments Segment


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 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.


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:
    1. full-year contributions from newly-acquired GI plants,
    2. anticipated additional contributions from Shantou Phase 1 and Xintai Zhengda’s new plant,
    3. continuous connection of new customers following mandatory closures of small dirty boilers and/or mandatory relocation into industrial parks; and
    4. strong M&S order book of Rmb2.5b to help drive earnings for 2020 and beyond.


  • We revise our EPS forecasts slightly while adding our 2022 forecasts.
  • Risks include:
    1. higher leverage from expansion,
    2. project execution risk, and
    3. forex.



  • 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 | https://research.uobkayhian.com/ 2020-03-02
SGX Stock Analyst Report BUY MAINTAIN BUY 0.88 UP 0.830