Title: More than enough gas – Sembcorp Industries Shines Bright
Conglomerate │ Singapore │ March 14, 2025 CGSI Research

Sembcorp Industries: Powering Ahead with Ample Gas Supply

Key Highlights:

• Minimal impact from the termination of gas imports (c.0.6mtpa) previously scheduled to begin in 2026.
• SCI has a total of c.2.8mtpa of PNG and LNG combined to power more than 22GWh of power generation on a 55% load factor.
• Newsflow on Vietnam’s tariff reshuffling could have been overblown, with minimal impact on SCI’s 49%-owned BCG GAIA solar plant.
• Maintain Add rating, with target price raised slightly to S\$7.81, as we roll forward our valuation to FY26F.

Termination of GSA with West Natuna: Minimal Impact

On March 13, 2025, SCI announced the termination of the Gas Sales Agreement (GSA) to import 111 BBTU/d of piped natural gas (PNG) from West Natuna Exploration Limited, Empyrean Energy PLC and Coro Energy Duyung (Singapore) Pte. Ltd. The termination was due to the lack of regulatory approval in Indonesia. The GSA was supposed to commence in 1H25 with gas delivery anticipated from 2026 for 11 years. [[Page 1]]
CGSI estimates this to be equivalent to c.0.6mtpa of gas in SCI’s c.2.8mtpa of long-term gas portfolio, which has a 40%/60% PNG/LNG split.

More than Sufficient Gas for Current and Future Needs

SCI’s existing gas portfolio of 2.8mtpa can power 22.8GWh of electricity based on a 55% load capacity. This is more than sufficient to meet the group’s current capacity of 1,219GW, the upcoming 600MW capacity in 2026, as well as for sale. Sembcorp Gas generated c.S\$152m of profits in FY23, which is likely to improve further in FY25F-27F with the commencement of LNG supply from 2025. SCI’s guidance of +5% CAGR in profit for gas and related services by 2028 remains unaffected. [[Page 1-2]]

Vietnam Tariff Reshuffling: Minimal Impact

Vietnam’s government expanded its review of renewable energy projects, focusing on issues like misapplied FIT incentives and land-use conflicts. While SCI’s 49%-owned BCG GAIA solar plant of 106GW in Vietnam could be at risk, the impact is expected to be minimal as it accounted for only 1% of SCI’s 13GW RE portfolio. [[Page 2]]

Peer Comparison and Valuation

CGSI maintains an Add rating on SCI, with a raised target price of S\$7.81 as we roll forward our valuation to FY26F. Key catalysts include stronger-than-expected earnings growth from capacity expansion, accelerated pace of acquisitions, and securing of RE contracts. Risks include unfavorable regulatory changes and prolonged unplanned plant shutdowns. [[Page 2-4]]

Other Notable Companies Covered:

Perusahaan Gas Negara (PGAS IJ)

– Add rating, with a target price of Rp1,800 – 10.8% 3-year EPS CAGR, 12.4% FY26 ROE

NTPC Ltd (NTPC IN)

– Not Rated – 14.5x FY25 P/E, 9.3% FY26 ROE

Power Grid Corp of India Ltd (PWGR IN)

– Not Rated – 15.1x FY25 P/E, 17.1% FY26 ROE

Tata Power Co Ltd (TPWR IN)

– Not Rated – 26.9x FY25 P/E, 12.9% FY26 ROE

GAIL India Ltd (GAIL IN)

– Not Rated – 8.9x FY25 P/E, 13.7% FY26 ROE

Petronet LNG Ltd (PLNG IN)

– Not Rated – 10.7x FY25 P/E, 23.7% FY26 ROE

Adani Green Energy Ltd (ADANIGR IN)

– Not Rated – 48.1x FY25 P/E, 19.7% FY26 ROE

Gas Malaysia Berhad (GMB MK)

– Hold rating, with a target price of RM4.10 – 14.4x FY25 P/E, 23.5% FY26 ROE

Malakoff Corporation (MLK MK)

– Add rating, with a target price of RM1.30 – 12.4x FY25 P/E, 5.9% FY26 ROE

Petronas Gas (PTG MK)

– Hold rating, with a target price of RM17.50 – 17.3x FY25 P/E, 14.1% FY26 ROE

Tenaga Nasional (TNB MK)

– Add rating, with a target price of RM19.10 – 16.6x FY25 P/E, 8.3% FY26 ROE

YTL Power International (YTLP MK)

– Add rating, with a target price of RM4.00 – 8.7x FY25 P/E, 12.6% FY26 ROE