ST Engineering - CGS-CIMB Research 2023-11-10: Set For A Stronger FY24

• ST Engineering (SGX:S63) guided for weaker y-o-y FY23F USS EBIT. We expect margin rebound in FY24F on ramp-up of major projects and streamlined Satcom costs.

Decent revenue growth led by aerospace, while order wins tapered

• - Read this at SGinvestors.io -
• Commercial Aerospace (CA) revenue was the key driver (+27% y-o-y), while Urban Solutions & Satcom (USS) recorded slight y-o-y growth (+6% y-o-y).
• 3Q23 order wins tapered to S$2.2bn (-53% q-o-q, -54% y-o-y), with all three segments seeing y-o-y declines.

Positive Aerospace trends; PTF on track to EBIT breakeven

• Maintenance, repair, and overhaul (MRO) revenue grew y-o-y (amount undisclosed) in 3Q23, driven by both airframe and engine & component (E&C). Hangar utilisation is close to maxed out, while E&C shops’ utilisation saw q-o-q improvement to 85%.
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• Expansion plans are on track, with:
  1. Guangzhou hangar commencing in 1Q24F, and
  2. Ezhou, Singapore, and Pensacola hangars commencing in 2025F.

Healthy DPS revenue growth, seeing good international demand

• Read more at SGinvestors.io.

LIM Siew Khee CGS-CIMB Research | Kenneth TAN CGS-CIMB Research | https://www.cgs-cimb.com 2023-11-10 SGinvestors.io

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