Sunpower Group - UOB Kay Hian 2021-09-09: 1H21 Strong Results, Fully Focused On Going Green

SUNPOWER GROUP LTD. (SGX:5GD) | SGinvestors.io SUNPOWER GROUP LTD. (SGX:5GD)

Sunpower Group - 1H21 Strong Results, Fully Focused On Going Green

  • Sunpower Group posted strong revenue and earnings for 1H21, led by robust growth in its principal Green Investments (GI) business. 1H21 GI PATMI came in strongly at RMB$91.8m (+37% y-o-y). The 37.0% y-o-y growth in GI PATMI was driven by the continued ramp-up of existing projects and strong contributions from new plants.
  • Following the divestment of its Manufacturing and Services (M&S) business, Sunpower Group paid out two special dividends amounting to S$0.24 per share in Jun 21 and Jul 21. We maintain BUY rating on Sunpower Group with a lower SOTP-based target price due to the removal of the special dividend.



SUNPOWER GROUP'S 1H21 RESULTS


Full steam ahead for the Green Investments (GI) segment.

  • Sunpower Group (SGX:5GD) completed the divestment of its Manufacturing and Services (M&S) business and recorded a gain of RMB934m in 2Q21. From this divestment, Sunpower Group paid out two special dividends of S$0.1406 per share and S$0.1006 per share in Jun 21 and Jul 21 respectively.
  • Sunpower Group’s outperforming GI segment would be the company’s sole principal business moving forward, providing Sunpower Group with strong, recurring and high-quality cash flows. Armed with a stronger balance sheet, Sunpower Group is in a good position to source for more GI project investments from its robust pipeline of projects under evaluation.

Excellent 1H21 GI results, driven by ramp-up of plants.

  • Sunpower Group’s GI segment posted robust part of Xintai Zhengda's new plant would continue to support robust revenue growth for Sunpower Group.


Riding on China’s economic recovery and policies.

  • China’s economy has rebounded from the impact of COVID-19, posting an impressive 12.7% disposal of the M&S segment, the GI segment has become the principal driver for Sunpower Group. We expect the:
    1. strong contributions from Shantou Phase 1 and Xintai Zhengda’s new plant,
    2. the continuous connection of new customers following mandatory closures of small dirty boilers and/or mandatory relocation into industrial parks, and
    3. the continuous cultivation of earnings quality and asset returns of existing projects to continue Sunpower Group’s strong momentum going into 2H21.


SUNPOWER GROUP - EARNINGS REVISION & RISK

  • We revise our earnings forecasts for Sunpower Group to adjust for the disposal of the M&S business. We forecast total annual revenues for 2021-23 at RMB2,547.5m, RMB3,218.2m and RMB3,541.2m respectively. 2021-23 PATMI forecasts are RMB218.0m, RMB325.5m and RMB385.5m respectively.
  • Risks include:
    1. higher leverage from expansion,
    2. project execution risk,
    3. forex, and
    4. raw material costs.


SUNPOWER GROUP - VALUATION & RECOMMENDATION






John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-09-09
SGX Stock Analyst Report BUY MAINTAIN BUY 1.03 DOWN 1.220



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