Sembcorp Industries share price lost steam

Lifetime Membership After conquering SGX in 2023, Sembcorp Industries share price looked out of sorts in 2024. Year-to-date, the counter has declined about 3.4%. Whilst the decline is not significant enough to warrant a concern, it appears that Sembcorp Industries share price has lost its all-conquering form of 2023 as the counter peaked at $5.80 in early February of 2024. Is this the beginning of the end for the leading energy and urban solutions provider?

The fantastic form of Sembcorp Industries share price should be credited to Group CEO, Wong Kim Yin, who joined the Group in July 2020. During his short tenure, CEO Wong has been instrumental in transforming Sembcorp Industries’ fortune post-demerger from Sembcorp Marine. Since the fateful demerger, Sembcorp Industries share price had gone from strength to strength, surging from $1.20 in September 2020 to the current $5.20 level.

The solid form of Sembcorp Industries share price in the past three years should be attributed to the Group’s ability to reinvent itself successfully as a renewable player. As such, some shareholders may be puzzled at the bearish of Sembcorp Industries share price in 2024. After all, there are no signs of any dark clouds on the horizon. So what could have punctuated the form of Sembcorp Industries share price?

For the past four years, the Group secured a slew of major green energy contracts which enabled Sembcorp Industries share price to return to the pre-pandemic levels. Evidently, the Group is committed in transforming its portfolio from brown to green as it aims to achieve gross installed renewables capacity to 10GW by 2025. With the acquisition of 245MW renewables portfolio in Vietnam in June 2024, the Group’s gross renewable energy capacity was 14.4GW. This means that the Group has met its renewable goal before 2025, leading to a new target of achieving 25GW of gross installed renewable capacity by 2028.

One of the key concerns is that Sembcorp Industries has been too aggressive in acquiring renewable projects in China, India and Southeast Asia in its zealous bid to meet its renewable targets. To fund these acquisitions, the total debts soared to $8.4 billion as at 30 June 2024 from $7.2 billion as at 31 December 2023. Moreover, despite the numerous acquisitions, the Renewable Business Segment continued to play second fiddle to the Gas and Related Services (previously known as Conventional Energy Business Segment). Net profit for the former amounted to $104 million in 1HFY2024 while the latter racked in $339 million of net profits during the corresponding period.

The heavy reliance on Gas and Related Services cost the Group dearly as Sembcorp Industries share price tumbled in June 2023 following the shock announcement of the introduction of Temporary Price Cap (TPC) on wholesale electricity prices by EMA. The move took effect from July 1 to prevent huge volatility in electricity prices. In this article, I will share my insights on the outlook of Sembcorp Industries share price in 2025.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested in Sembcorp Industries share currently. Whether Sembcorp Industries share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Sembcorp Industries share price faces test in 2025

Admittedly, I am a big fan of Sembcorp Industries as it was my best investment. I had clocked in a profit of $17,500 after cashing out in December 2020. Back then, I had predicted that Sembcorp Industries share price would continue to perform well in 2021, which it did. In my April 2022 article on Sembcorp Industries share price, my target price was $3.00 for FY2022. Despite the company’s pedigree and financial track records, I am hesitant to invest in this counter again. This is especially at the current Sembcorp Industries share price. The key reason is because [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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