Gregory Yap

Sunpower Group Ltd

Equity Bottom-Up

1H21: Strong Results, Fully Focused On Going Green
SPWG posted strong revenue and earnings for 1H21, led by robust growth in its principal GI business. 1H21 GI PATMI came in strongly at Rmb$91.8m (+37% yoy). The 37.0% yoy growth in GI PATMI was driven by the continued ramp-up of existing projects and strong contributions from new plants. Following the divestment of its M&amp;S business, SPWG paid out two special dividends amounting to S$0.24/share in Jun 21 and Jul 21. We maintain BUY with a lower…

A purer play on clean energy going forward
• The disposal of the M&amp;S business for RMB2.29bn has been completed, with two tranches of special dividend of S$0.1406 a share and S$0.1006 a share paid out in June and July.
• New capacity from Tongshan P1, Shantou P2, Xintai Zhengda and Shanxi Xinjiang plants are expected to complete construction in 2021/early 2022 and contribute to the group next year.
• We maintain our OUTPERFORM recommendation with a target price of $$1.22 based on the discounted…

New Chapter Unfolding
• 1Q21 revenue grew by 31% YoY and PATMI rose by 17% YoY, in line with our expectations mainly due to the contribution from Shantou Phase 1 project.
• Sunpower’s valuation will be wholly derived from GI projects moving forward as the company continues its transformation to pursue sustainability.
• We maintain an OUTPERFORM rating with an upgraded target price of $$1.53 (ex-dividend S$1.29) based on individual project’s discounted cash ﬂows and the special dividend declared…

1Q21: Superior Profitability And Cashflow From GI; Awaiting Special Dividend
Sunpower’s 1Q21 results are in line, with earnings of Rmb59.7m (+17.0% yoy) led by more GI projects coming on-stream. Sunpower is in the midst of transitioning towards being a pure power producer. In 2021, Sunpower will focus on: a) improving capacity utilisation, b) expansion of coverage areas, and c) planned construction of expansion phases for existing projects. Maintain BUY with a higher target price of S$1.22…

2021 To Be Year Of Transformation
Following the record PATMI achieved in 2020, 2021 will be a year of transformation for Sunpower. In the midst of disposing of the order-driven M&amp;S segment, Sunpower’s focus will turn towards achieving scale as an industrial steam-power producer in China. With enhanced cash flow generation ability and long-term revenue visibility, valuations should improve going forward. Re-iterate BUY with a slightly higher target price of S$1.11.
Transformation towards highly…

China

Founded in 1997 and listed in 2005, Sunpower Group Limited (5GD.SI / SPWG SP) is an environmental protection company specialising in fighting air pollution using proprietary energy-saving and clean power technologies. Since 2017, Sunpower has expanded heavily into “Green Investments” (GI), its sizeable and valuable portfolio of anti-smog investment projects that generate long-term, recurring and high-quality cashflows and now account for more than half of recurring profits and cashflow. The “Manufacturing & Service” (M&S) business provides a variety of high-end customised environmental protection products and solutions to approximately 1,500 customers across 15 industries in over 30 countries, such as Wanhua Chemical, Hengli Petrochemical, CNOOC, CNPC, SINOPEC, ExxonMobil, BASF, BP, Shell, and many others. 70% of them are repeat customers.

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