CGS International Securities
August 8, 2025
Sembcorp Industries: M&A, Capital Recycling, and Renewables Powering Singapore’s Energy Giant
Introduction: Sembcorp Industries – A Defensive Bet with Upside
Sembcorp Industries (SCI), a leading Singapore-based conglomerate, stands at the forefront of the region’s energy transition. With a robust mix of gas-fired and renewable assets, SCI’s growth narrative is anchored in strategic M&A, capital recycling, and operational synergies, particularly following its increased stake in Senoko Energy. This report by CGS International Securities, dated August 8, 2025, delivers a comprehensive analysis of SCI’s recent performance, future outlook, and peer comparison across Asia’s energy and utility sector.
Key Investment Highlights
- M&A and Capital Recycling: SCI’s pursuit of value-accretive deals, especially in brownfield and greenfield opportunities across the Middle East and India, is expected to drive future earnings. Management targets deals with at least S\$100 million of annual earnings accretion.
- Senoko Energy Synergies: With its stake in Senoko Energy increased from 30% to 50%, SCI anticipates stronger profit contributions in the second half of 2025.
- Renewable Energy Strength: Despite headwinds in gas services, SCI’s renewable portfolio, especially in India and China, continues to outperform, supported by additional capacity and favorable wind conditions.
- Dividend and Valuation: Interim dividend per share (DPS) declared at S\$0.09, up from S\$0.06 previously. Target price revised to S\$8.02, representing a 19.3% upside from the current S\$6.72, based on 13x CY26 P/E multiple.
Financial Performance Review
SCI reported a 1H25 net profit of S$536 million, down 1% year-on-year but up 12% compared to the previous half. This fell short of consensus, comprising 45% of full-year forecasts, mainly due to underperformance in Gas & Related Services (GRS). Core profit, adjusted for forex losses and divestment gains, was S$491 million.
1H25 GRS Segment Summary:
- Net profit: S\$330 million (-3% yoy, -15% hoh)
- Headwinds: Absence of S\$25-30 million in one-off gas gains, S\$5 million in high-priced RE imports from Malaysia, and S\$30 million impact from Singapore portfolio renewals at lower spark spreads.
Outlook: Gas Services to Rebound, Renewables to Expand
SCI expects the GRS segment to recover in 2H25, with Senoko’s full six-month contribution estimated at S$71 million. FY25 GRS net profit is likely to reach S$700 million (-3% yoy). SCI revealed that 13% of its gas-fired power portfolio is due for renewal in the next five years, but the impact in 2H25 is expected to be muted.
Renewables and Capital Recycling:
- India: 3.3GW installed, 3.3GW under development. Management is exploring capital recycling for mature assets, potentially by 2H25/1H26.
- China: Oversupply noted in Northwestern region and Guangxi, with high curtailment risks.
- ESG Progress: SCI is on track with ambitious decarbonization targets, aiming for 25GW gross RE capacity by 2028, backed by a S\$14 billion capex plan (75% for renewables).
Strategic Risks and Defensive Earnings
SCI’s net debt stood at S$7.38 billion in 1H25, reduced from FY24’s S$7.8 billion. Management views at least S$1 billion of earnings as defensive, with further upside from M&A and capital recycling. Risks include regulatory changes and prolonged plant shutdowns.
Other Operational Highlights
- Singapore Cogen Plant: Limited impact expected from upcoming 5-week maintenance, as contracts are locked in.
- UK Market: Customer demand may reduce due to the closure of SABIC’s ethylene cracker facility in Wilton.
- Urban Solutions: Continued demand for industrial land in Northern and Southern Vietnam, despite US tariffs.
ESG and Sustainability Leadership
SCI has demonstrated consistent progress in ESG metrics:
- MSCI ESG Rating: AA in 2024
- Climate Change CDP Score: Improved from C- (2017) to B (2020-present)
- GHG Emissions Intensity: Achieved 0.27 tCO2e/MWh as of Nov 2024, surpassing its 2025 target of 0.40 tCO2e/MWh
- Targets: Reduce absolute emissions to 2.7 million tCO2e by 2030, net-zero by 2050
SCI’s successful decarbonization is likely to result in premium valuations, positioning it as ASEAN’s renewable energy powerhouse.
Peer Comparison: Regional Utilities and Renewable Companies
The report features an extensive peer analysis across India, Malaysia, Thailand, China, and the Philippines, benchmarking Sembcorp on P/E, EV/EBITDA, ROE, and dividend yield.
| Company |
Ticker |
Recommendation |
Price |
Target Price |
Market Cap (US\$ m) |
P/E (CY25F) |
P/E (CY26F) |
P/E (CY27F) |
EPS CAGR |
ROE (CY26F) |
Div Yield (CY26F) |
| Perusahaan Gas Negara |
PGAS IJ |
Hold |
1,685 |
1,575 |
2,508 |
8.1 |
8.0 |
7.9 |
4.2% |
10.6% |
8.5% |
| NTPC Ltd |
NTPC IN |
NR |
334.8 |
NA |
37,049 |
13.9 |
12.7 |
11.9 |
6.1% |
12.9% |
3.0% |
| Power Grid Corp of India Ltd |
PWGR IN |
NR |
284.9 |
NA |
30,239 |
17.1 |
15.5 |
14.6 |
5.3% |
17.0% |
3.4% |
| Tata Power Co Ltd |
TPWR IN |
NR |
378.8 |
NA |
13,815 |
31.4 |
30.3 |
20.0 |
15.7% |
12.6% |
0.7% |
| GAIL India Ltd |
GAIL IN |
NR |
171.2 |
NA |
12,844 |
9.0 |
8.9 |
8.8 |
2.8% |
13.1% |
4.0% |
| Petronet LNG Ltd |
PLNG IN |
NR |
273.3 |
NA |
4,678 |
10.3 |
8.6 |
9.9 |
7.9% |
19.6% |
4.1% |
| Adani Green Energy Ltd |
ADANIGR IN |
NR |
914.1 |
NA |
16,526 |
81.8 |
27.4 |
33.2 |
50.9% |
15.9% |
n/a |
| Acme Solar Holdings Ltd |
ACMESOLA IN |
NR |
270.9 |
NA |
1,871 |
65.2 |
29.5 |
13.0 |
82.8% |
10.6% |
n/a |
| Sembcorp Industries |
SCI SP |
Add |
6.72 |
8.02 |
9,314 |
12.4 |
10.8 |
10.2 |
4.4% |
17.1% |
3.6% |
Financial Summary
| Year End |
Revenue (S\$m) |
Operating EBITDA (S\$m) |
Net Profit (S\$m) |
Core EPS (S\$) |
Core EPS Growth |
FD Core P/E (x) |
DPS (S\$) |
Dividend Yield |
EV/EBITDA (x) |
P/BV (x) |
ROE (%) |
| Dec-23A |
7,042 |
1,772 |
1,020 |
0.60 |
43.9% |
11.26 |
0.13 |
1.93% |
9.23 |
2.61 |
24.8% |
| Dec-24A |
6,417 |
1,729 |
1,020 |
0.57 |
(5.1%) |
11.87 |
0.23 |
3.42% |
10.03 |
2.23 |
20.3% |
| Dec-25F |
6,030 |
1,586 |
1,012 |
0.54 |
(4.2%) |
12.39 |
0.23 |
3.38% |
10.44 |
2.01 |
17.1% |
| Dec-26F |
6,204 |
1,620 |
1,087 |
0.63 |
15.5% |
10.73 |
0.24 |
3.63% |
9.66 |
1.80 |
17.7% |
| Dec-27F |
6,424 |
1,683 |
1,148 |
0.66 |
5.5% |
10.17 |
0.26 |
3.83% |
9.91 |
1.63 |
16.8% |
Balance Sheet and Key Ratios
- Net Debt: S\$7.38 billion (1H25)
- Net Gearing: 133% (Dec-23A) rising to 138% (Dec-24A), then declining to 119% (Dec-25F)
- ROE: 24.8% (Dec-23A) down to 17.1% (Dec-25F)
- Operating EBITDA Margin: Stable at 25–27%
- Effective Tax Rate: Approximately 15–16%
- Net Dividend Payout Ratio: 40%
Conclusion: Sembcorp’s Investment Case
SCI remains an attractive defensive play in the Singapore energy sector, backed by resilient earnings from its diversified portfolio, strong ESG credentials, and clear M&A strategy. With robust dividend yields and upside potential from synergy, capital recycling, and renewables growth, SCI is recommended as an Add, with a 19.3% upside to the revised target price of S$8.02. Investors should monitor regulatory risks and operational execution, but the long-term trajectory positions SCI as a leader in Asia’s energy transition.
Stock Ratings and Distribution
Recommendation Framework:
- Add: Total return expected to exceed 10% in the next 12 months.
- Hold: Total return between 0% and +10%.
- Reduce: Total return below 0%.
Sector and Country Ratings:
- Overweight: Above-market weight recommended.
- Neutral: Neutral weight recommended.
- Underweight: Below-market weight recommended.
SCI Analyst Coverage:
- LIM Siew Khee, Meghana KANDE
Price and Performance Snapshot
- Current Price: S\$6.72
- Target Price: S\$8.02
- Market Cap: US\$9,314m
- Free Float: 50%
- Major Shareholder: Temasek Holdings (49.5%)
- Price Performance: 1M: -10.1%, 3M: 3.2%, 12M: 41.5%
Sembcorp Industries continues to solidify its status as Singapore’s leading energy conglomerate, delivering value through disciplined capital management, strategic expansion in renewables, and steadfast commitment to sustainability.
