NDP Special Offer! On 19 July 2022, Sembcorp Industries issued a profit guidance that the “financial results for 1H2022 is expected to be materially higher than 1H2021”. In this regard, investors should expect plenty of fireworks for Sembcorp Industries share price on 5 August 2022. However, before Nirvana can be reached, investors must put on their seat belt as stock market may be roiled yet again by the upcoming US FOMC meeting which herald another interest rate hike.
Being an utility company and waste management company, Sembcorp Industries’ businesses are deemed defensive, serving as an hedging investment amid the inflationary environment. Against the backdrop of soaring commodity prices, the Group’s Conventional Energy business is expected to be given a strong tailwind due to the strong energy demand and higher margins.
For FY2021, Conventional Energy business was the largest profit contributor as the segment raked in $174 million of net income. If it’s not for the $212 million impairment of Chongqing Songzao power plant incurred, Sembcorp Industries would have posted a significantly larger profit for FY2021. Henceforth, all eyes will be on the performance of the Conventional Energy business this year.
In FY2021, Singapore and India markets contributed 62% and 19% of revenue respectively. In Singapore, 95% of the electricity is generated using natural gas as raw materials. So the key index that would affect Sembcorp Industries share price would be the price trend of natural gas as it would affect the profit margin. On the other hand, Sembcorp’s thermal plants in India uses 70% domestic coals and 30% imported coals. Thus, the other index that would affect Sembcorp Industries share price should be the price trend of domestic and imported coal prices in India.
Note that this is an opinion article and not meant to be a financial advice. …
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