Analysis

First Quarter 2021 (1Q21) Financial Performance

SCC’s net income for the first quarter of the year jumped 93% year-on-year to Php 2.3 Billion as coal business improved due to higher export sales, and higher plant availability of SLPGC pushed total power sales volume. Coal sales volume for the first quarter of the year rallied 21% year-on-year to 3.9 million metric tons (MMT). Export sales volume rose 31% year-on-year following a gradual global economic recovery. Total power sales increased 15% year-on-year to 796 gigawatt-hours (GWh) as average selling price recovered due to improved market conditions.

China’s Coal Demand

Robust manufacturing activity in China pushed strong demand for coal, which kept coal prices afloat. However, China put a quarterly limit on coal imports that could weigh on prices. We expect China will impose higher quota ahead the high-demand summer months to address tight domestic coal supplies. This should also decrease coal prices in the short-term.

Recommendation

We adjust our Target Price downward to P18.12 per share following full-year 2020 (FY2020) financial results. However, we maintain our Buy rating as demand continues to rise for both its coal and power businesses.

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