- ST Engineering (SGX:S63)'s 3Q23 revenue growth of 8.7% y-o-y was in line with our FY23e expectations. No detailed financial data was provided. Order wins of S$2.2bn were lower than the average of S$4.6bn-4.8bn, which could be due to the timing of the tender closure. The orderbook stood at a high S$27.5bn (Jun 2023: S$27.7bn).
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- Management lowered its guidance for the Urban Solutions and Satcom division (USS). It expects a bigger severance provision for Satcom of S$7mil for FY23e (1H23: S$2mil), resulting in y-o-y EBIT decline at USS.
- Maintain BUY on ST Engineering with target price of S$4.50.
The Positive
Commercial aerospace led 3Q revenue growth, underpinned by aviation recovery amidst tight hangar capacity.
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- Pratt & Whitney’s problem with the GTF engines could also lead to shifts in demand for CFM’s engines, for which ST Engineering has built a niche. 4Q23e revenue could be stronger with revenue from the aircraft sale.
The Negative
Restructuring at Satcom is expected to incur severance costs of S$7mil (1H23: S$2mil).
- Read more at SGinvestors.io.
