[Click e-Stock] "SGC Energy, Clearly Improved Performance... Target Price Up 10%"

[Asia Economy Reporter Park Jihwan] Hana Financial Investment maintained a 'Buy' rating on SGC Energy on the 14th, stating that the company is showing significantly improved performance, and raised the target price by 9.7% to 68,000 KRW.

Yoo Jaeseon, a researcher at Hana Financial Investment, said, "Due to the expansion and conversion of power generation facilities in 2021, increases in electricity sales volume, REC issuance volume, and surplus greenhouse gas emission allowances

will be reflected in revenue and profit growth in 2022," adding, "Based on this year's performance, the price-to-earnings ratio (PER) is 6.3 times and the price-to-book ratio (PBR) is 0.9 times, indicating undervaluation compared to the return on equity (ROE)."

Operating profit for the fourth quarter is expected to be 54.8 billion KRW, a 1,525% increase year-on-year, and sales are projected to rise 355.1% to 586.7 billion KRW. Growth of 88.7% year-on-year is anticipated in the power generation and energy sectors due to the rise in electricity sales prices following the SMP increase and the recognition of SGC Green Power’s performance, which began operations in November.

SMP is expected to remain strong through the first half of this year, and steam sales are recovering after securing new supply sources, which is positive. Operating profit is forecasted to increase by 1,525% year-on-year to 54.8 billion KRW. Researcher Yoo Jaeseon said, "Significant profit growth is expected from self-developed projects in the construction and real estate sectors," and added, "In the power generation and energy sectors, substantial profit growth is anticipated considering revenue growth from increased power generation and REC sales, as well as cost reductions from greenhouse gas emission allowance sales."

Key sales indicators also show favorable trends. Since October last year, REC spot prices have been rebounding, and considering the completion of SGC Green Power and the full conversion of some power plants to biomass, REC production volume has increased, which is positive. The SMP uptrend is expected to continue through the first half of 2022, and greenhouse gas emission allowance prices are also expected to gradually rise due to strengthened regulations.

Furthermore, in 2024, commercial operation of carbon capture facilities is scheduled, and after completion, revenue recognition from liquid carbon dioxide sales and additional acquisition of surplus emission allowances could serve as long-term growth drivers.