ST Engineering - RHB Invest 2024-05-14: In-line 1Q24; Maintain 2024 Growth Expectations

• We remain upbeat on ST Engineering for its defensive dividends and strong profit growth, aided by continued growth and margin improvement in Commercial Aerospace (CA) and a strong recovery in Urban Solutions & Satcom (USS).
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• With S$3bn of order wins in 1Q24, the outstanding orderbook stands at S$27.7bn, offering about three years of revenue visibility.

Excluding USS, all businesses reported revenue growth.

• On a y-o-y basis, Commercial Aerospace (CA) and Defence & Public Security (DPS) reported 32% and 14% revenue growth respectively, amidst broad-based growth across all of its sub-segments.
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  • For DPS, the digital business registered strong performance with 1Q24 revenue of S$147m, which is already at ~32% of its 2023 revenue of S$463m. The digital business is on track to well exceed its 2026 revenue target of S$500m.
  • For USS, although TransCore saw 10% y-o-y revenue growth, the division’s overall revenue fell by 1%.
• ST Engineering is guiding for – and we believe that – the strong improvement in USS revenue should be visible in 2H24. CA, DPS, and USS 1Q24 revenue accounted for 28%, 25% and 20% of our FY24 estimates.

Decent order wins.

• Read more at SGinvestors.io.

Shekhar Jaiswal RHB Securities Research | https://www.rhbgroup.com/ 2024-05-14 SGinvestors.io

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