Singapore Technologies Engineering (STE SP): Upbeat Growth Outlook With Aggressive 2029 Growth Targets

UOB Kay Hian | 19 March 2025

Upbeat Growth Outlook

During its 2025 Investor Day, STE unveiled aggressive growth targets ahead, aiming to achieve S\$17b group revenue by 2029 (five-year CAGR: 8.6%) and potentially even faster net profit growth (up to 13.6% CAGR). Given STE’s strong track record, the analyst has high hopes that STE will be able to deliver these growth targets. They have raised their 2025-27 core earnings forecasts by 2-16% accordingly and maintain a BUY recommendation on STE, with a higher target price of S\$6.80, based on 23.5x 2026F PE (1.5SD above mean). [[28]]

Well on Track to Meet 2026 Targets

As a review of STE’s performance in the past few years against its 2026 growth targets, by 2024 STE had already achieved: a) group revenue of over S\$11.0b, b) commercial aerospace revenue of over S\$3.5b, and c) digital business revenue of over S\$0.5b, two years ahead of its targeted deadline. Some other 2026 targets such as: a) smart city revenue of S\$3.5b (2024 actual: S\$2.7b), and b) sustainability-linked revenue of over S\$3.0b (2024 actual: S\$2.6b) remain on track. [[28]]

Aggressive 2029 Growth Targets

According to management, STE’s group revenue is targeted to grow at a CAGR of 2x global GDP growth rate, to S\$17b by 2029. This implies a five-year revenue CAGR of over 8.6% in 2025-29, faster than the targeted revenue growth CAGR of 7.4% for 2021-26 established in its previous investor day.
For individual business segments:
Commercial Aerospace (CA): CA revenue is targeted to grow at a 6.5% CAGR (doubling the aerospace industry growth rate) to S$6.0b by 2029, driven by strong demand for STE’s MRO services and aerostructure & system products.
Defence and Public Security (DPS): DPS revenue is targeted to grow at a 9% CAGR to over S$7.5b by 2029, driven by both strong Singapore domestic demand, and increasing contract win momentum for international defence sales. The digital business (including cloud, AI analytics and cybersecurity) is the key bright spot for growth, with its revenue targeted to more than double to over S$1.3b by 2029.
Urban Solutions & Satcom (USS): USS revenue is targeted to grow at an approximate 10% CAGR to S$3.2b by 2029, driven by favorable macro trends such as increasing urbanisation and demand for smart city solutions. Smart city revenue from international markets is expected to grow by a double-digit CAGR, driven by expanding international reach and cross-selling opportunities. The transformation of Satcom remains on track, with some early signs of turnaround from cost savings and new product launches. 28 – 29

Faster Net Profit Growth Expected

Management expects the group’s net profit to expand even faster than revenue, with net profit CAGR potentially exceeding revenue CAGR by up to 5ppt. This implies a net profit CAGR of up to 13.6%. The faster growth of STE’s net profit is expected to be driven by a potential margin expansion from: a) favourable scale effect of STE’s higher projected revenue, b) improved margins of product and project mix in the orderbook, c) procurement and productivity gains, d) reduced interest expense, and e) reduced amortisation of intangibles related to STE’s previous acquisitions. [[29]]

Confident in Delivering 2029 Targets

Given: a) the favourable macro and industry dynamics at the several key industry pillars of STE, b) STE’s strong market positioning in those pillars, and c) proven strong management and execution track record, the analyst has high hopes that STE will be able to deliver its 2029 growth targets. STE’s orderbook also stood at a record-high level of S\$28.5b as of end-24, providing good growth visibility. [[29-30]]

Earnings Revision and Valuation

The analyst has raised their 2025/26/27 earnings forecasts by 2%/8%/16% to S\$793m/S\$901m/S\$1,010m, respectively, to reflect STE’s more aggressive growth target than their previous projections. Their updated earnings forecasts imply a 14% core earnings CAGR in 2025-27.
Maintain BUY and raise target price to S$6.80, based on 23.5x 2026F PE, pegged to 1.5SD above STE’s historical mean PE. The +1.5SD peg takes into account STE’s upbeat earnings growth outlook. 30