"The recent share price pullback appears driven by profit-taking after its strong sector outperformance, which is a trend also observed among other global defence names as some investors trimmed positions," says OCBC in its Aug 29 note.
"Optimism around a potential Russia-Ukraine ceasefire also played a role."
From OCBC's point of view, its 1HFY2025 report card is "solid", with earnings up 19.7% y-o-y to $402.8 million.
Besides its "meaningful" exposure to defence-related manufacturing which is currently in a multi-year defence spending upcycle, ST Engineering's integrated aerospace lifecycle fleet solutions enable better capture of maintenance, repair and overhaul spend.
The continued ramp-up of its passenger-to-freighter conversion business will support growth as well.
The company's order book has reached $31.2 billion as of June 30, an increase of 18% y-o-y, with about $5 billion expected to be delivered in the remainder of the year. Around a third of the contracts are defence-related.
"This provides strong revenue visibility and underpins management’s confidence in execution for the rest of 2025," says OCBC.
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The brokerage adds that ST Engineering is to be seen as a "differentiated" name versus its peers, thanks to its strong earnings visibility, a solid orderbook, and tailwinds across aerospace and defence.
"The company’s long-term growth story remains intact, underpinned by structural drivers of higher defence spending globally.
"Many nations also face ageing defence systems, pointing to sustained, not temporary, demand. Even if the Ukraine war ends, defence spending is likely to stay elevated. Our fair value estimate is unchanged at $8.90."
ST Engineering shares closed at $7.68 on Aug 29, up 0.26% for the day.
