Sembcorp Industries (SCI) reported a 36.3% YoY rise in revenue to S$3.0b but saw an 11.6% drop in net profit to S$82.3m in 3Q18, such that 9M18 net profit accounted for 71% of our full year estimate, in line with expectations. The lower net profit was mainly due to the marine segment.

Utilities’ net profit was S$91m, an increase of S$63.5m from 3Q17. Utilities core net profit was S$101m, a 20.7% increase over 3Q17, with its India operations delivering a S$28.9m profit and China’s Changzhi water treatment plant and Chongqing SongZao both contributing positively to the group. Urban development continued to deliver steady profits.

The India energy business is expected to be profitable for 2018, despite a weaker upcoming fourth quarter. Pending an analyst briefing later, we maintain our BUY rating but put our fair value estimate of S$3.53 under review.

Source: OCBC Research - 2 Nov 2018