Goldman Sachs initiates coverage on ST Engineering; stock up 5%
Shares of the tech, defence and engineering group are down 8.6% in the past month
ST Engineering shares jumped 5% on their first day of coverage by Goldman Sachs, which upgraded the stock to a "buy" rating with a 12-month target price of S$13.20. The Singapore-based tech, defence, and engineering group's stock had been sliding 8.6% over the past month, reaching as low as S$10.19 on September 17. The "buy" rating implies a 29.5% upside from the September 17 closing price, and Goldman Sachs expects a 20% compound annual growth rate (CAGR) in net profit from 2025 to 2029, reaching S$1.7 billion.
This growth projection significantly surpasses ST Engineering's long-term guidance of 13% and the Bloomberg consensus forecast of 15%. Goldman Sachs identified three key growth drivers: expanding commercial aerospace capacity, a surge in international defence contracts, and operational cost efficiency. Analysts noted that ST Engineering's asset-light expansion model, leveraging technology transfer, preserves capital and yields higher operating margins.
However, Morningstar maintained a "hold" rating with a S$11.10 target price, citing lagging domestic defence contract wins and potential operational constraints in passenger-to-freighter conversions.
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