Sembcorp Industries

Sembcorp Industries > Add

CGS CIMB, May 3

Target price: S$3.49

May 4 close: S$3.04

FIRST-QUARTER 2018 core net profit of S$76 million (-34 per cent year-on-year) was below expectations at 20 per cent of our forecast for FY2018, mainly because of Sembcorp Marine's (SMM) losses and wider-than-expected losses in India.

However, Sembcorp Industries remains confident that India will be profitable by end-2018. Indian IPO timeline still on track (not disclosed, but we project second-half 2018).

Singapore utilities saw some margin pressure from power segment in Q1 2018 but no alarming declining trend ahead. China core profit was stronger quarter-on-quarter on seasonality.

Potential catalysts for the stock: SMM's share price movement from order wins or surge in oil price, and successful IPO and turnaround of Indian operations.

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