In his April 4 note, Sum says that ST Engineering has chalked up a record order book of $28.5 billion as of Dec 2024.
Sum estimates that its earnings will grow at an "impressive" 15 - 20% CAGR between FY2024 and FY2026.
The growth is "driven by capacity expansion and a faster cadence of project deliveries across all business segments, along with strengthening operating margins as ST Engineering benefits from better pricing, increased operational leverage, and productivity gains, as well as lower interest costs from deleveraging."
Sum's bullish note follows the company's recent update of its growth targets to FY2029, including earnings CAGR in the low to mid-teens between FY2024 and FY2029.
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In his view, the company's defence and smart city targets could outperform what the company is guiding for, supported by structural shifts in global spending and years of execution groundwork.
"In defence, rising procurement budgets in Europe and the Middle East, especially for equipment, are expanding ST Engineering’s export runway, with earlier investments in R&D, partnerships and marketing now set to deliver returns," says Sum.
Smart city contracts, meanwhile will see growth as governments prioritise mobility, sustainability and public safety initiatives.
"We see continued execution on its growth story catalysing a re-rating," says Sum.
As at 3.10 pm, ST Engineering shares dropped 1.04% to change hands at $6.68.
