ST Engineering - UOB Kay Hian 2024-08-15: 1H24 Results In Line; Expecting Record-High Levels Of Revenue & Profit In 2024

• ST Engineering (SGX:S63)’s 1H24 headline net profit rose 19.9% y-o-y to S$337m. Excluding one-off items such as forex gains and fair value changes of financial instruments, core net profit of S$326m (+16.4% y-o-y) was in line with our expectations, forming 49.7% of our full-year forecast. Revenue rose 13.5% y-o-y to S$5.52b in 1H24, accounting for 49.1% of our full-year forecast.
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Segmental EBIT performance: Strength in DPS offset misses by CA and USS.

Defence & public security (DPS):

• The DPS division’s 1H24 EBIT of S$314m (+5.6% y-o-y) beat our expectations at 65.0% of our full-year forecasts, thanks to stronger-than-expected EBIT margin of 13.2% (vs our projected 10.5%), which benefitted from favourable operating leverage and project mix.
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Commercial aerospace (CA):

• The CA division’s 1H24 EBIT of S$159m (+3.1% y-o-y) slightly missed our projection, at 42.8% of our full-year forecasts, due to slightly weaker-than-expected EBIT margin of 7.1% (vs our projected 8.0%). CA EBIT margin dipped y-o-y in 1H24, due to more aircraft sale in 1H23 that boosted CA revenue and margins.
• CA margin was also somewhat affected by delays in some MRO project deliveries due to the reduced availability of spare parts amid the aviation industry’s supply chain issues.

Urban solutions & satcom (USS):

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Roy Chen CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-08-15 SGinvestors.io

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