Sembcorp Industries (SCI) delivered a 46.6% YoY rise in revenue to S$3.3b and a 46.8% increase in net profit in 2Q18 to S$81.9m, bringing 1H18 net profit to S$158.6m. This accounted for 47% of our full year forecast, and is within expectations.

Utilities net profit in 2Q18 was S$85.0m, a 97.8% increase from 2Q17 with India operations delivering S$39.4m in profit. This is encouraging and we have been waiting for more clarity on this front, as mentioned in our earlier report “India to turnaround this year”.

Urban Development continued to perform well while Marine had a loss in the quarter. With an expected turnaround in profitability for India, the utilities business should deliver a better performance this year.

An interim dividend of S$0.02/share has been declared. Pending an analyst briefing, we maintain our BUY rating but put our fair value estimate of S$3.59 under review.

Source: OCBC Research - 3 Aug 2018