$ST Engineering(S63.SI)$  $11.30 Target Price.

*ST Engineering (SGX: S63)* is in a multi-year re-rating. The stock is up ∼102% in 2025 and another ∼29% YTD in 2026, but analysts still see growth because of this:

*1. Record Order Book = Multi-Year Visibility*

- *S$35.7B order book* at end-June 2026 — new record high, up from S$32.6B at end-2025 and S$28.5B in FY24.

- *S$5.7B to be delivered in 2H 2026 alone.*

- 1Q26 wins: *S$4.8B* in new contracts. 1H26 DPS alone won S$3.6B.

- This is not one-off — it's backlog across all 3 segments.

*2. Defence & Public Security (DPS) — Largest Segment, 43% of Revenue*

The global defence upcycle is the core driver.

- 1H26 revenue *+7% YoY to S$2.82B*, EBIT +10% to S$404M.

- *International defence surge:* 1Q26 international defence wins already ∼2x full-year 2025 level.

- Key wins: *€315M 5-year Qatar military platform MRO*, *S$600M 6-year Kuwait Naval Force subcontract*, *£65.8M 5-year UK munitions contract*.

- Management target: *>S$7.5B DPS revenue by 2029*.

*3. Commercial Aerospace — Strongest Margin Expansion*

- 1H26 revenue *+15% YoY to S$2.69B*, EBIT *+29% to S$288M*.

- Target: *S$6.0B revenue by 2029*.

- Catalysts:

- *Passenger-to-Freighter (P2F) conversions* ramp-up

- *MRO demand:* Record fleet age 15.2 years, aircraft supply constraints, growing LEAP engine fleet = more maintenance

- Aviation asset management being restructured into fund platform, potential AUM *US$3.5B by 2029*

*4. Urban Solutions & Satcom — AI / Smart City Pivot*

- *Physical AI investment:* S$250M into AI for ports, airports, smart mobility.

- *Smart mobility export:* TransCore wins in Australia, LTA bus electrification, tolling, and smart city contracts in Singapore.

- *Satcom reset:* iDirect impairment in FY25 (S$689M) was painful, but turnaround is underway. Removal of that overhang is a re-rating catalyst if iDirect is sold/restructured.

*5. Earnings Growth Outpacing Revenue*

- 1H26: Revenue *+11% to S$6.57B*, Net Profit *+27% to S$512M*, EBIT +23% to S$738M, margin 7.8% vs 6.8%.

- Goldman Sachs forecasts *20% net profit CAGR 2025-2029 to S$1.7B* — well above company's own 13% guidance and consensus 15%.

- Driven by operating leverage, cost efficiency, and better mix (more MRO + defence services vs low-margin hardware).

*6. Capital Returns & Portfolio Clean-up*

- FY25 dividend *23 cents* including 5 cents special from divestments (LeeBoy, CityCab, SPTe, STARCO = S$306M gains).

- Focus on core 3 segments, divesting non-core.

*Bottom line:* S63 growth is not one catalyst — it's 1) Defence upcycle, 2) Aerospace MRO super-cycle, 3) AI-enabled Urban Solutions, all backed by a S$35.7B order book.