Sembcorp Shares Decline Following Citi's Profit Forecast Cuts

Sembcorp Industries experienced a notable decline in its share price, reaching a four-month low of S$5.93 (approximately USD 4.30) on July 3, following a downgrade from Citi. The stock ultimately closed at S$5.98 (about USD 4.34), down 3.4% or S$0.21 (USD 0.15) for the day, with around 19 million shares traded.

Citi analyst Luis Hilado revised the recurring profit forecast for Sembcorp for the next three years, reducing it by 6 to 11%. Additionally, the forecast for reported profits was lowered by 10 to 14%, attributed to weaker performance across multiple business segments. Sembcorp's earnings for the first half of 2026 are anticipated to fall 26% below Bloomberg consensus estimates, according to Hilado.

“By next year, Alinta is expected to start generating significant profits and drive a strong financial recovery.”Luis Hilado, Citi Analyst

Factors Influencing the Downgrade

Several factors contributed to Citi's cautious outlook. Hilado noted that rising gas prices, adverse weather conditions affecting power generation from Sembcorp's wind farms, and an unfavorable exchange rate between the Indian rupee and Singapore dollar could negatively impact the company's financial performance.

Moreover, the analyst indicated that the one-time costs associated with Sembcorp's recent acquisition of Alinta Energy have not yet been fully integrated into the forecasts by other brokerages, adding another layer of uncertainty.

Future Outlook and Recommendations

Despite the immediate challenges, Citi maintains a recommendation to buy Sembcorp shares. The report suggests that Alinta is expected to begin generating significant profits by 2027, which could support a robust financial recovery for Sembcorp in the coming years.

As investors assess the implications of Citi's analysis, the market will be closely watching Sembcorp's upcoming earnings report in August for further insights into the company's performance and strategic direction.