ST Engineering: Aerospace Is Flying High; Our Forecast and Fair Value Estimate Are Unchanged

ST Engineering's first-quarter operating update revealed revenue of SGD 2,704 million, reflecting strong aerospace sales, supporting our thesis for the segment to benefit from capacity added over the past few years as aircraft and engine maintenance, overhaul, and repair demand remains strong. With March-quarter revenue making up 23.9% of our 2024 estimate, and largely in line, we keep our profit forecast unchanged. Our fair value estimate remains at SGD 4.72 per share, placing STE in 4-star territory. Besides aerospace, the defense and public security segment sales are also tracking well, making up 24.6% of our full-year estimate. This has helped offset flat revenue for the urban solutions segment, despite growth in TransCore, which may be attributed to the timing of urban rail projects, as well as continued weakness in the satellite communications business.