- We upgrade SIA Engineering (SGX:S59) to ADD with a higher target price of S$2.70 (19.5x CY25F P/E), backed by a clearer earnings outlook and decent valuation (17x CY25F P/E).
3QFY24F EBIT likely returned to profitability
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- SIA Engineering likely returned to profitability in 3QFY24F, with EBIT of S$1.9m (2QFY24: -S$0.3m, 3QFY23: -S$12.5m) though its stronger operating leverage was likely partially offset by elevated staff costs and FX losses.
Associates profit boost likely to be more apparent in coming quarters
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- Given that ESA is the only engine MRO service provider in Southeast Asia that is part of P&W’s GTF network, we think the group is set to capture the bulk of repairs from affected airlines operating in the region; based on our analysis, ESA will likely service airlines from New Zealand, the Philippines, and Vietnam.
- In our view, gradual easing of supply chain woes would drive engine induction volumes, and be a key driver of its associates’ FY25F profit growth (we estimate +13% y-o-y).
Healthy revenue growth should lift operating leverage
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