Analysts raise ST Engineering target price as it jumps 7.2% on Iran conflict, defence contract wins

[SINGAPORE] Shares of ST Engineering enjoyed a double boost this week from the Iran conflict and the company’s defence contract wins.A few analysts have raised their target price for the stock, which jumped as much as 9.1 per cent on Tuesday (Mar 3) as the US-Israel-Iran conflict continued for a fourth day. The counter climbed to an intraday high of S$11.18, before paring some gains to close at S$10.99, up 7.2 per cent on the day. This marked a second straight day of gains for ST Engineering, after a 2.8 per cent rise on Monday.Analysts said the defence sector is likely to see gains amid the conflict, buoyed by the prospect of rising global defence budgets.“ST Engineering is looking to double its international sales this year, with the Middle East as its major market,” said PhillipCapital analysts on Monday.Defence contract winsMaybank analyst Krishna Guha noted that the company doubled international defence order wins to S$600 million in 2025, and is targeting S$1.2 billion for 2026. This aggressive expansion follows a year where core net profit rose 21 per cent to S$851 million.RHB analyst Shekhar Jaiswal, in a note on Tuesday, concurred that defence and public security “should remain a structural growth pillar” for the company, underpinned by the ongoing conflict in the Gulf.He added that the push to increase military readiness in Europe was another positive factor for ST Engineering, as was the push for munitions refill, defence electronics and critical infrastructure cyberprotection in parts of Asia.DBS analyst Jason Sum on Monday said rising procurement budgets in Europe and the Middle East, especially for equipment, “are expanding ST Engineering’s export runway”. He noted that earlier investments in research and development, partnerships and marketing are now “set to deliver returns”.DBS raised its target price for the stock from S$10.20 to S$11. RHB’s Jaiswal highlighted “early momentum” from a 315 million euro (S$470 million) contract, announced on Feb 27, for the maintenance, repair and overhaul of Qatari land platforms as a defence booster for the company.ST Engineering described that contract win as a “breakthrough” into Qatar’s defence market.A record order book that “underpins stronger backlog conversion” through 2026 and beyond, and capacity-led growth in commercial aerospace were also flagged by Jaiswal as drivers for ST Engineering.He reiterated a “buy” call for the stock, with a raised target price of S$11.70, from S$10.70 previously.DBS’ Sum added that ST Engineering’s record order backlog of S$33.2 billion “underpins earnings visibility”, with a double-digit earnings compound annual growth rate projected over the medium term. The “imminent divestment” of its loss-making satellite communications business, iDirect Group, was also flagged as a positive.While the divestment is seen as a long-term positive, it came at a high immediate cost. The company’s net profit for 2025 fell 34 per cent to S$463 million due to S$388 million in one-off net write-offs, primarily from a S$667 million impairment related to iDirect.Still, Sum forecasts accelerating “smart city demand” could boost the company’s earnings further, as governments prioritise mobility, sustainability and public safety initiatives.However, not all analysts are chasing the current price spike. While Morningstar’s Lorraine Tan raised its fair value estimate by 26 per cent to S$10.80 following the strong margin outlook, Maybank’s Guha maintained a “hold” rating as he cautioned that the stock’s valuation is becoming “elevated”.Based on a price of S$11.10, ST Engineering is currently trading at over 40 times earnings, significantly higher than its historical average of 19 times.