Analysts are still optimistic on Sembcorp Industries’ prospects following the company’s positive 1HFY2021 results ended June 30.
DBS Group Research has retained its “buy” rating for the stock with an unchanged target price of $2.40.
The brokerage points out that a successful execution of its renewable energy plan – translating into earnings growth – would further lift valuation ahead.
“We are positive on Sembcorp’s longer-term prospects as its growing renewable portfolio should continue to drive its valuation re-rating,” DBS analyst Ho Pei Hwa writes in an Aug 10 report.
OCBC Investment Research, too, has reiterated its “buy” rating for the stock with an unchanged fair value of $2.50.
With a turnaround due to the de-merger with Sembcorp Marine, the brokerage says Sembcorp will see key financial metrics, such as its return on equity, turn for the better.
See also: China coal impairment could drastically hit Sembcorp's 1H, FY21 earnings: CGS-CIMB
OCBC notes that it would be even more encouraged if the company’s future improvement were to be driven by a fundamental pick-up in the utilities space.
“Successful execution of renewables strategy provides further scope for re-rating,” the OCBC research team writes in an Aug 6 note.
Meanwhile, CGS-CIMB Research has maintained its “add” rating for the stock with a higher target price of $2.51 from $2.43 previously.
The brokerage has raised its earnings per share forecast by 29% to reflect its strong performance in India and Singapore in 1HFY2021, and higher UK earnings ahead as well as lower corporate costs.
“Decarbonisation of conventional energy assets and the securing of renewable energy contracts are key potential re-rating catalysts,” CGS-CIMB’s head of research Lim Siew Khee writes in an Aug 6 report.
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As at 3.35 pm, Sembcorp was up 1 cent or 0.5% at $2.01 with 4.7 million shares changed hands.
