ST Engineering 1Q26 update: modern warfare capabilities and global contract wins in focus; stay bullish

Research evidence excerpt

ST Engineering 1Q26 update: modern warfare capabilities and global contract wins in focus; stay bullish

Karen Li, CFA AC Asia Pacific Equity Research

(852) 2800-8589 19 May 2026 J P M O R G A N

karen.yy.li@jpmorgan.com

as of 1Q26, and management targeting USD 63 million; most of these benefits (excluding

severance costs) are expected to flow directly to cash flow, supporting margin expansion

and improved profitability. Management expects continued recovery and progressive

improvement in Satcom, with 1Q26 marking the strongest first quarter in terms of

revenue for USS. Key contract wins in rail electronics, passenger information systems,

tolling back-office solutions, and integrated smart security management further reinforce

the segment’s growth trajectory and outlook.

• Strong track record of cash flow generation and disciplined capital management

support consistent shareholder returns. STE’s robust operational performance and

ongoing cost discipline have driven healthy cash flow generation (SGD1.7B in operating

cash flow in 2025), enabling the group to declare an interim dividend of 4.0 cents per share

for 1Q26. Net profit growth outpaced rebased revenue growth in the quarter, with

management confirming the group is on track with the investor day target of net profit

growth outpacing revenue growth by up to 5 percentage points. Management remains

committed to maintaining a strong balance sheet and reinvesting in growth opportunities

across core businesses, while continuing to deliver stable and attractive returns to

shareholders. Confidence in sustained earnings visibility, margin expansion, and future

cash flow is underpinned by a resilient order book and broad-based momentum across all

segments.