Sembcorp Industries (SCI) has reported a 10% shortfall in its core profit for the first half of 2025, primarily due to weaker gas-related earnings, according to a recent report by DBS Group Research. Despite this setback, the company remains a key player in Asia’s energy transition, with plans to significantly expand its renewable energy capacity by 2028.
The report highlights that SCI’s gas and related services saw a 15% year-on-year decline in earnings, attributed to moderating power spreads and the absence of high-margin gas trading contracts. Additionally, losses from renewable imports from Malaysia are expected to persist until 2026 due to accreditation issues affecting pricing.
However, SCI’s renewable and integrated urban solutions sectors performed well, with net profits growing by 22% and 14% year-on-year, respectively. The company is also exploring capital recycling opportunities, particularly in India, to fuel further growth and acquisitions in new renewable markets.
DBS Group Research maintains a “BUY” rating for SCI, with a revised 12-month price target of SGD7.40, down from SGD8.00. The report cites potential catalysts such as accretive acquisitions and capital recycling of Indian renewable assets as key drivers for future growth.
Despite the current challenges, SCI’s management remains committed to rewarding shareholders, having declared a higher interim dividend of 9 Singapore cents per share. The full-year dividend is expected to remain at 23 Singapore cents, translating to a yield of approximately 3-4%.
In conclusion, whilst SCI faces near-term industry challenges, its strategic positioning and long-term growth plans in the renewable energy sector continue to offer promising prospects.
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