In a report released yesterday, Lim Siew Khee from CGS-CIMB downgraded ST Engineering to a Hold, with a price target of S$8.70.
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Lim Siew Khee has given his Hold rating due to a combination of factors that reflect both the strengths and challenges facing ST Engineering. The company’s margins have improved across various segments, notably in Commercial Aerospace, which saw a significant increase in EBIT margin. Additionally, the order book has grown, with notable international business expansion, particularly in the Middle East.
Despite these positive developments, the stock is trading at a premium, which suggests that the expected growth is already reflected in the current price. The company’s balance sheet has strengthened with reduced borrowings and anticipated divestment proceeds, yet the valuation remains high relative to historical averages. These factors, combined with the potential risks of slower order wins, have led to the decision to maintain a Hold rating, as the upside potential appears limited given the current market conditions.
In another report released today, DBS also maintained a Hold rating on the stock with a S$8.20 price target.