OCBC Investment Research
Date of Report: 14 July 2025

Sembcorp Industries: Powering Ahead with Renewables, Earnings Growth, and Strategic Expansion in 2025

Overview: Sembcorp Industries’ Remarkable 2025 Performance

Sembcorp Industries (SCI), a global leader in energy, water, and urban development, has delivered a stellar performance in 2025, cementing its position as a top performer on the Singapore Exchange. With a robust track record of executing its renewables strategy and a recent strategic acquisition in the energy sector, SCI is poised for continued growth and value creation for shareholders.

SCI Share Price: Outperforming the Market with Consistent Gains

• SCI’s share price surged by 35% year-to-date (YTD), far outpacing the Straits Times Index’s (STI) 8% rise.
• This follows impressive share price increases of 69% and 59% in 2022 and 2023, respectively, and a modest 4% gain in 2024.
• Key drivers include a stable growth outlook, healthy dividend and payout growth, and a strategic push into renewables.

Major Strategic Move: Increasing Stake in Senoko Energy

• On 13 June 2025, SCI completed the acquisition of a 28.6% interest in Lion Power, which holds a 70% stake in Senoko Energy Pte. Ltd.
• This brings SCI’s effective ownership in Senoko Energy to 50%.
• The move demonstrates SCI’s commitment to Singapore’s energy security and provides new opportunities for earnings growth and synergies.
• The expanded stake is expected to underpin future earnings, particularly as SCI continues to grow its renewable capacity.

Financial Summary: Strong Growth and Healthy Margins

• Gross margin expected to improve from 23.5% in FY24 to 25.0% in FY25E and FY26E.
• Dividend yield projected to rise from 3.1% (FY24) to 3.8% (FY25E) and 3.9% (FY26E).
• Net profit margin to strengthen from 15.8% (FY24) to 16.8% (FY25E) and 16.9% (FY26E).

Key Company Data

• Ticker: SCIL.SI
• Market Cap: SGD 13.2 billion
• Daily Turnover: SGD 23.4 million
• Shares Outstanding: 1,783 million
• Free Float: 49%
• Top Shareholder: Temasek Holdings (49.3%)

ESG and Strategic Sustainability Initiatives

• SCI operates in a high-risk sector due to carbon intensity, but 71% of its operations are in less carbon-intensive business lines versus peers.
• SCI’s carbon intensity is 45% lower than the industry average.
• Strong performance in Water Stress, Carbon Emissions, Governance, and Toxic Emissions & Waste.
• Five-year strategic plan (announced Nov 2023):
• Halve Scope 1 + 2 emissions intensity of its power generation fleet by 2028 (versus 2023).
• Reduce absolute GHG emissions by 90% by 2030 (versus 2020 levels).
• Increase renewables capacity to 25GW by 2028.

Investment Thesis: Growth Drivers and Opportunities

• SCI’s strong share price is attributed to a stable outlook, rising dividends, and aggressive renewables expansion.
• The increased stake in Senoko Energy provides earnings support and strategic positioning for Singapore’s energy future.
• Opportunities abound from rising demand due to AI adoption and industrial realignment.
• Fair value estimate raised from SGD 7.20 to SGD 8.45 on earnings upgrades and strategic moves.

Potential Catalysts

• Accretive acquisitions in the region at reasonable valuation multiples.
• Further expansion into renewables.
• Higher power prices.

Risks to Watch

• Macroeconomic downturns.
• Operational challenges in India and the UK; potential asset impairments.
• Risks in acquisition execution and integration.

Valuation Analysis: Sembcorp vs Peers

Company Overview: Business Segments and Geographic Reach

Sembcorp Industries is a leading provider of energy and urban solutions with a global presence. The company’s balanced portfolio includes fast-growing renewables (solar, wind, energy storage) and proven expertise in transforming raw land into sustainable developments. Its purpose-driven approach focuses on contributing to the energy transition and sustainable development worldwide.

• By Segment (FY24 Revenue):
  • Gas and Related Services: 72.3%
  • Renewables: 11.6%
  • Integrated Urban Solutions: 6.7%
  • Others: 9.4%
• By Geography (FY24 Revenue):
  • Singapore: 74%
  • UK: 9%
  • China: 6%
  • India: 6%
  • Others: 5%

Detailed Financials: Income Statement and Key Ratios

• Return on Common Equity rose impressively from 2.74% in 2020 to 20.5% in 2024.
• Net Income Margin climbed from 2.03% in 2021 to 15.90% in 2024.
• Dividend payout ratio increased to 41.2% in 2024, reflecting SCI’s commitment to returning value to shareholders.
• Net Debt/Equity improved, standing at 1.65 in 2024.

Dividend and Earnings Track Record

• Dividends per share have grown steadily, with FY2024 DPS at 23 S-cents (up from 5 S-cents in FY2021).
• Earnings per share also show a healthy upward trajectory, underpinning the sustainability of dividend growth.

Analyst Ratings and Recommendations

• OCBC Investment Research maintains a BUY rating for SCI, with a 12-month fair value of SGD 8.45.
• The BUY rating reflects expected total returns (excluding dividends) in excess of 10% based on the current price.

Conclusion: Sembcorp Industries Positioned for Sustainable Growth

With a strong financial foundation, strategic acquisitions, and a clear commitment to renewables and sustainability, Sembcorp Industries stands out as a compelling investment choice for 2025 and beyond. Its continued focus on value creation, operational excellence, and ESG leadership makes it a company to watch in the evolving global energy landscape.