ST Engineering Rises After Goldman Sachs Buy Call

That bullish stance helped reverse some of the recent weakness in the counter, which had fallen 8.6% over the past month to S$10.19 before Friday’s rebound. The stock touched S$10.70 in early trade and ended up 2.4% at S$10.43, still below Goldman’s target but above Morningstar’s S$11.10 valuation ceiling. The divergence underscores a split in the market between those betting ST Engineering can accelerate overseas growth and those worried its domestic business is maturing more slowly.

Goldman’s thesis is built on three levers: commercial aerospace, international defence and operating efficiency. In aerospace, the bank expects revenue to grow at a 13% CAGR and EBIT at an 18% CAGR through 2029, helped by a global aircraft shortage that has pushed the average in-service fleet age to a record around 15 years and lifted heavy maintenance demand. ST Engineering is doubling its CFM56 and CFM Leap engine maintenance, repair and overhaul capacity in Singapore to more than 300 shop visits a year by 2027, which could position it to capture constrained supply in a market where parts availability remains tight.

The defence outlook is even more aggressive. Goldman projects international defence revenue to rise at a 62% CAGR from 2025 to 2029, lifting that business to 30% of total defence revenue from about 10% now. The bank argues Europe’s industrial shortfall and Middle East demand could funnel more contracts to ST Engineering, which has an order book coverage of 2.3 years, below the 3.3 years seen at global peers and 4.4 years at European peers. That leaves room for new wins if the company can execute on its asset-light expansion model with local partners.

For investors, the key question is whether that growth can translate into margin expansion. Goldman thinks operating margin can improve to 11.5% by 2029 from 9.6% in 2025, helped by more than S$1 billion in cumulative cost savings and lower satcom costs. Morningstar was more cautious, arguing the stock is already fairly valued at 32 times 2026 earnings and warning that domestic defence orders may cool after a 72% surge in 2025. It also flagged tight feedstock availability for passenger-to-freighter conversions and competitive pressure on iDirect from low-Earth-orbit rivals such as Starlink.

The broader market backdrop suggests investors are willing to pay up for visible industrial growth, but not without proof. ST Engineering’s recent price action shows the stock had already been under pressure before Goldman’s call, leaving room for a technical bounce, but its shares remain below the 50-day and 200-day moving averages in the latest trading data. That means the upgrade is likely to matter most if it is followed by evidence of sustained contract wins, stronger aerospace execution and clearer margin traction.

For now, Goldman’s initiation reframes ST Engineering as a capital-light compounder with exposure to defence rearmament and aircraft maintenance bottlenecks. Whether that story holds will depend on whether the company can turn backlog and capacity into faster profit growth than the market has so far been willing to price in.