ST Engineering Earnings: Strong Growth to Continue in 2024, No Change to Our Thesis

We keep our fair value estimate on narrow-moat ST Engineering, or STE, at SGD 4.72 following largely decent 2023 results. Our thesis is unchanged. We expect STE to post relatively strong three-year average earnings per share growth of 15.5% on the back of average 9.9% growth in revenue and operating margin to improve to 9.6% in 2026 from 9.1% in 2023. We expect growth to be underpinned by its commercial aerospace, or CA, and digital systems & cybersecurity activities and improved operating margins in the CA and urban solutions segments. Our earnings forecast is little changed. We remain buyers of STE with our fair value estimate pricing the company on 21 times price/earnings and 3.2% dividend yield, in line with its historical range.