ST Engineering - RHB Invest 2023-05-16: In Line 1Q23 & Strong Order Wins; Keep BUY

• ST Engineering’s 1Q23 revenue of S$2.3bn was in line, accounting for 24% of our 2023F. It reported strong order wins in 1Q23, with an outstanding orderbook of S$25.4bn at an all-time high.
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• We continue to like ST Engineering for its strong revenue visibility and defensive dividend outlook. We expect it to deliver a 17% profit CAGR in 2022-2025F. Maintain BUY and S$4.05 target price, 12% upside from the current ST Engineering's share price and ~4% yield.

All businesses reported y-o-y growth.

• ST Engineering (SGX:S63) reported 1Q23 revenue of S$2.3bn (+13% y-o-y). On a y-o-y basis, all businesses reported revenue growth: commercial aerospace (CA) (+29% y-o-y), urban solutions & satcom (USS) (+46% y-o-y), and defence & public security (DPS) (+1% y-o-y) (excluding the US Marine business, which was sold in 2022).
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  • Urban Solutions & Satcom (USS) growth was aided by contribution from Transcore, which offset some weakness in the satcom business. USS revenue growth and Transcore contribution to the segment are expected to improve as project deliveries are backend loaded.
  • Defence & Public Security (DPS) revenue is expected to pick up in the next few quarters.

Strong order wins with order deliveries in 2H23.

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Shekhar Jaiswal RHB Securities Research | https://www.rhbgroup.com/ 2023-05-16 SGinvestors.io

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