- ST Engineering (SGX:S63)'s 1H23 PATMI of S$280.6m (+0.2% y-o-y) met our and consensus estimates, at 50% of the respective FY23 forecasts. The increase was mainly due to contribution from Commercial Aerospace (CA) and Defence and Public Security (DPS) while Urban Solution and SATCOM (USS) lagged.
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- Our target price for ST Engineering is correspondingly increased by 2.4% to S$4.20 (DCF based at an unchanged WACC of 7.4% and 2% TGR), offering 13% potential upside with 4.5% yield.
Strong CA and DPS growth; USS remains weak
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- Defence and Public Security (DPS) earnings rose 40% y-o-y, attributable to business growth and absence of losses from US marine divestment amid higher contract wins of US$5.2b in 1H23.
- Urban Solution and SATCOM (USS) recorded higher EBIT loss of S$34m (+13% y-o-y) due to Satcom’s weaker performance amid global supply chain disruption and one-time loss of S$24m from the divestment of SatixFy shares.
Long-term growth well supported by various catalysts
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