Sembcorp Industries - CGS-CIMB Research 2021-03-12: Sunny Skies


Sembcorp Industries - Sunny Skies

  • With the latest 60 MWp solar project awarded by HDB and EDB, Sembcorp Industries (SGX:U96)’s renewable energy portfolio in Singapore strengthened to ~302 MW.
  • Currently, Sembcorp Industries has a total of ~756 MW of solar power capacity, comprising 302 MW in Singapore and 435 MW in India.
  • Maintain ADD with slightly higher target price of S$1.97 still based on 1x CY21F P/BV. Sembcorp Industries trades at 0.87x P/BV, cheap vs regional power/utilities plays’ ~1.6x

Sembcorp Industries a leading incumbent in the Singapore solar market

  • Sembcorp Industries announced that it has been awarded a 60 megawatt-peak (MWp) solar project by the Housing & Development Board (HDB) and the Singapore Economic Development Board (EDB). The project entails the construction and operation of grid-connected rooftop solar systems across 1,154 HDB blocks and 46 government sites in Singapore.
  • We understand that Sembcorp Industries will work with an external engineering, procurement and construction (EPC) contractor for the building and installation of the panels. The project will generate energy to power ~16,000 four-room HDB flats for a year as well as offset ~32 kilotonnes of carbon emissions annually.
  • This is fifth installment of the SolarNova programme, a joint effort led by HDB and EDB to advance the deployment of solar photovoltaic systems within Singapore. HDB is targeting 540 MWp of solar energy capacity by 2030 while the Energy Market Authority (EMA) aims to deploy at least 2 GWp in Singapore (or 350,000 households).
  • Including the new project awarded, Sembcorp Industries’s solar power capacity in Singapore totals 362.3 MWp (~302 MW). As such, Sembcorp Industries continues to be the leading solar energy provider in Singapore vs Sunseap’s solar power capacity of ~300 MWp (as of May- 20).
  • Sembcorp Industries’s other projects under development in Singapore are a 60 MWp floating solar photovoltaic system on Tengeh Reservoir (by 2H21) and a 17.4 MWp solar system on the rooftops of 48 JTC Corporation buildings (by 4Q21).

Growing solar energy portfolio, in line with “brown to green” plan

  • In Jan 2021, Sembcorp Energy India Limited (SEIL) won a 400 MW solar power project in Rajasthan, a Northern Indian state. Upon completion by mid-2022, the power produced will be sold to the Solar Energy Corporation of India (SECI) at a pre-specified tariff (INR2/kWh) under a 25-year power purchase agreement. This will bring Sembcorp Industries’s total solar power in India to 435 MW. In FY20, Sembcorp Industries also completed 17 MWp of rooftop solar installations in Vietnam.
  • Solar energy portfolio is still small to the group; we estimate about 756MW. As at 12 Mar 2021, Sembcorp Industries has over 3.2 GW of renewable energy capacity globally. Its renewable portfolio spans across solar, wind, and energy storage.

Well-positioned for shift towards renewables; maintain ADD

LIM Siew Khee CGS-CIMB Research | 2021-03-12
SGX Stock Analyst Report ADD MAINTAIN ADD 1.970 SAME 1.970