“The overall spot prices were pushed up by aggressive buying from state power distribution companies including Maharashtra, Gujarat and Telangana due to increased demand in the agricultural and industrial sectors given the current dry spell,” Lim says.
In September so far, electricity spot prices have averaged Rs4.13/kwh, and hit a high of Rs6.50/kwh earlier this week.
“If spot prices continue to hover above Rs6/kwh for the remaining weeks of September, we estimate the three-month average spot prices for Jul-Sep to be around Rs4/kwh, similar to the levels in Apr-Jun,” Lim says.
Lim notes that high average spot prices had contributed to a “surprisingly strong” core profit for SCI’s India operations in 2Q18. And the analyst opines that SCI India’s 3Q18 profit could remain impressive.
“Utilisation was lower in Jul and Aug due to maintenance,” Lim says. “However, the latest spike in spot prices could spur SCI to ramp up plant load factor to enjoy the strong spread.”
As at 1.12pm, shares in Sembcorp Industries are trading 10 cents higher, or up 3.4%, at $3.00. This implies an estimated price-to-earnings ratio of 12.0 times and a dividend yield of 3.4% for FY19.
