Excerpts from DBS report
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<News First Take> 3Q21 negative profit guidance as higher commodity prices bite
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What’s New
Sunpower has issued a profit guidance for its 3Q21 results after its share price slid c.6% to S$0.53 on Wednesday. The Group has guided for 3Q21 profit to be negatively impacted as commodity prices have pushed up feedstock costs.
That said, on a 9M21 basis, profit for the Green Investments business (which is the remaining business after the recent M&S segment divestment) is still expected to record an increase year-on-year.
The Group has implemented mitigating measures to tackle rising commodity prices including raising steam prices with customers, controlling unit material consumption, stocking up feedstock when prices are conducive, pursuing cost savings through blended combustion of sludge and other wastes and by increasing efficiency, and adding new customers.
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Our View The negative development justifies our downgrade of the stock in May 2021. Our out of consensus downgrade in May 2021 had highlighted that rising coal prices could dent profit margins and weigh down on Sunpower Group. We currently have a HOLD call on Sunpower with a TP of S$0.70 under review. Sunpower’s results are expected to be released in November. |
