Ready for takeoff: STE’s recovery in sight as Airbus ramps up production

Airbus targets to increase production to 45 per month by the fourth quarter.

ST Engineering (STE) is set to recover this year as Airbus increases the production of A320 aircraft, the CGS-CIMB said in a report.

Airbus announced in May that it will increase the monthly production of its A320 aircraft to 45 by the fourth quarter of the year from the current 40 per month.

This will be further raised to 64 per month by the second quarter of 2023, higher than the 55 monthly productions recorded in February 2020.

“STE Commercial Aerospace’s production of engine nacelle [US subsidiary, MRAS] and floor paneling [German subsidiary, EFW] are set to recover as Airbus gradually ramps up monthly production of A320 aircraft,” the CGS-CIMB said.

Airbus also tapped suppliers to prepare for a scenario of 70 per month by the first quarter of 2024 and potentially 75 per month by 2025.

Moreover, CGS-CIMB noted STE’s recovery could come ahead of its Singapore peer, SIE, as domestic travel in the US resumes.

The US Transportation Security Administration sees the volume of air travel during the summer to rise.

Some airports across the US have also seen passenger travel volumes of pre-pandemic levels with some already exceeding 2019 travel volumes, which could lead to a pick-up in airframe maintenance, repair, and overhaul services in the US.

“We lift our FY21-23F earnings per share by 5-6% on stronger revenue and margins for STE Commercial Aerospace. We think STE should recover ahead of SIE,” the report read.