Sunpower Group - Phillip Securities 2022-05-04: Full Steam Ahead


Sunpower Group - Full Steam Ahead

  • Steam sales volume grew at a CAGR of 31% over FY18-21 to 7.93 mn tons. In 4Q21, the Shantou Project Phase 1 began full production; the Tongshan Project commenced trial production; while the Shanxi Xinjiang project is expected to be completed by 2022.
  • China’s urban steam demand is expected to grow at a CAGR of 3.6% from 2020 to 2025, to 4.88bn GJ in 2025, with steam being the non-discretionary input for production by industrial customers.

Sunpower Group - Company Background

  • Sunpower Group (SGX:5GD)’s main business segment is Green Investments (GI), under which it supplies industrial steam to a wide range of industries. The company has strong R&D capabilities, having been granted 163 patents, including 61 invention patents.
  • Green Investment (GI) portfolio consists of a total of 11 projects, including nine in operation, one in trial production and one under construction. Sunpower Group’s projects are all long-term, with recurring high-quality income and cash flows expected, on typically 30-year concessions.

Sunpower Group - Key Highlights

Strong growth in steam sales volume.

  • Steam sales volume increased at CAGR of 31% from FY18 to 7.93mil tons in FY21. Sunpower Group’s GI portfolio consists of 11 projects.
    • For the Changrun Project, steam supply to its new large customer Sanli started in May 2021 and it will continue to connect to new customers.
    • For Xinyuan Project, Sunpower further expanded the clean heating supply coverage area by 2mil sqm in Jimo International Trade Park.
    • Shantou Project Phase 1 is now at full production level, with one boiler of Phase 2 in trial production.
    • The Tongshan Project has commenced trial production, while construction on the Shanxi Xinjiang Project is expected to be completed by 2022.
  • Sunpower Group continuously ramps up their GI projects, including expanding coverage areas and customer base.

China’s urban steam demand is expected to grow at CAGR of 3.6% from 2020 to 2025, from 4.09bn GJ in 2020 to 4.88bn GJ in 2025.

  • According to the National Bureau Statistics of China, the total area covered by central heating grew at CAGR of 7.7% from 7.39bn sqm in 2016 to 9.95bn sqm in 2020. The GI business can provide “clean and green, ultra-low emission” steam supply to enterprises in industrial parks, where Sunpower Group is the exclusive supplier.
  • Steam is also the non-discretionary input for production by industrial customers situated in industrial parks. The length of project pipelines grew 23% y-o-y to 372km and is expected to continue expanding with new projects, supported by the strong demand for urban steam.

High entry barriers.

Vivian Ye Phillip Securities Research | https://www.stocksbnb.com/ 2022-05-04
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000