In a report released today, Jason Sum from DBS downgraded SIA Engineering Co (SEGSF – Research Report) to a Hold, with a price target of S$2.50.
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Jason Sum has given his Hold rating due to a combination of factors affecting SIA Engineering Co’s current and future performance. The company’s recent quarterly results did not meet expectations, primarily due to margin compression, which has led to a downward revision of net profit estimates by 15-20% for the upcoming fiscal years. This reflects ongoing supply chain challenges and the costs associated with start-up and development activities.
Despite these near-term challenges, SIA Engineering Co is well-positioned for long-term growth due to its technological edge and strong business volumes driven by its parent company, SIA. The company benefits from strategic partnerships with leading OEMs, which enhance its capabilities in maintaining new aircraft types. Additionally, its strategic initiatives, such as partnerships with Air India and expansions in various regions, are expected to drive growth in the medium term. However, the dimmer near-term growth prospects and extended path to margin recovery justify the Hold rating.