[SINGAPORE] The price target for ST Engineering was raised by multiple analysts on Friday (Aug 15) after it reported a strong financial performance in the first half of 2025.
CGS International’s Lim Siew Khee raised her price target to S$8.70 from S$8.40; RHB analyst Shekhar Jaiswal upped his to S$9.10 from S$8.70.
Morningstar’s Lorraine Tan, director of equity research for Asia, raised the engineering group’s fair-value estimate by 21 per cent to S$8.10.
On Thursday, the company reported a 19.7 per cent rise in net profit to S$402.8 million for the first half of 2025, up from S$336.5 million in the corresponding period of the year before.
This was driven largely by revenue growth from its commercial aerospace as well as its defence and public security business segments, despite drag from the US tariffs and foreign currency exchange.
The counter dropped 6.3 per cent to S$8.40 at the close on Thursday, with 13.3 million shares having changed hands. It had closed at an all-time high the previous day at S$8.96. Tan had said that the drop could be due to “overheated sentiment in the defence sector”.
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RHB’s Jaiswal said that ST Engineering’s defence and public security (DPS) margins exceeded expectations. He added that a record-high order book and solid revenue visibility, underpinned by growth in the commercial aerospace and DPS units, expanding international defence orders and minimal exposure to the US trade tariffs, reinforced the investment case in its stock.
The limited impact of US tariffs on ST Engineering was also flagged as a positive by Lim, who pointed out that the group had maintained plans to not absorb its suppliers’ tariff costs unless it was able to pass through such costs.
The group also lowered its guidance for the impact of the US tariffs on engine maintenance and repair operations (MRO) in China to S$34 million for the second quarter, from its previous less-precise estimate of under S$40 million a month.
ST Engineering opened a new MRO facility in Ezhou, China’s Hubei province, on Aug 11, under its joint venture with SF Airlines, a Chinese cargo airline owned by SF Express, a logistics company.
CGS International’s Lim and Morningstar’s Tan lauded the group’s efforts at cost-cutting: it had slashed S$100 million in costs in the first quarter of 2025 alone. Tan said Morningstar had “underestimated STE’s ability to lower costs this quickly”.
“We believe the market will reward STE for hiving off low-margin/loss-making businesses,” said Lim.
Tan echoed the sentiment, adding that the company is on track to meet its S$1 billion cost-saving target through 2029.
However, CGS International downgraded ST Engineering to a “hold” on the back of it trading at three standard deviations above its historical average.
Lim said the market appears to have priced in the 2026 growth forecast of a 13 per cent growth in earnings per share. She also noted that the company faces some downside risk from slower order wins.
Tan suggested that the easing of growth in defence sales in the second half could have come from a strong base effect.
“We think the key risk remains STE’s ability to keep on the profitability path,” she said.
RHB kept its rating at “buy”, and raised its 2026-2027 earnings forecast by 3 to 4 per cent on sustained commercial aerospace and DPS margins, with the price target including a 4 per cent environmental, social and governance premium.
CGS International estimates a 2 to 5 per cent lift in earnings per share, based on lower financing costs and higher commercial aerospace segment margins.
