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This comes after the group increases its commercial aerospace capabilities with new contracts
RHB Research has lifted its target price on ST Engineering by 11.1 per cent to S$5 from S$4.50.
On Monday (Jul 22), analyst Shekhar Jaiswal maintained his “buy” call on the counter as he believes that the group’s profit is able to grow at a compound annual growth rate of 15 per cent from 2023 to 2026.
This comes after ST Engineering increased its commercial aerospace capabilities with new contracts.
Earlier this month, the group’s commercial aerospace unit entered into a two-year contract which came with an option for extension. This is to provide module repair offload support for two of Safran Aircraft Engine’s engine types.
The engine types are CFM Leap-1A and Leap-1B engines, which are high-bypass turbofan engines for commercial aircraft. The Leap-1A is one of the two engine options on the Airbus A320 neo family, and the Leap-1B is an exclusive engine option for the Boeing 737 MAX.
The analyst also believes that ST Engineering could benefit from the growing demand for maintenance, repair and operations services as the number of Leap engines in operation grows rapidly.
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“The Leap engine has a substantial backlog of more than 10,600 engines, indicating continued growth in the industry,” said Jaiswal.
He added that ST Engineering’s new data centre will expand its total IT capacity to more than 30 megawatts across four locations in Singapore.
The data centre, which is designed to meet international cybersecurity standards and standards for responsible artificial intelligence development, is slated for completion in 2026.
As a result, Jaiswal said he remains optimistic on the group’s defensive dividends and strong profit growth.
The analyst also projected ST Engineering’s commercial aerospace unit to continue growing and improve its margins, as well as its urban solutions and satcomm segment to log a strong recovery.
Shares of ST Engineering were trading 1.1 per cent or S$0.05 lower at S$4.40 as at 1 pm on Monday.
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