Highlights

• 1H26 reported net profit of S$373m (+158% yoy) was boosted by sizeable one-off disposal gains. Core earnings (S$207m) rose 35% yoy, still a beat.
   
• 2H26 is expected to be even stronger, driven by further gross profit margin improvement and cost initiatives achieved from recent non-core asset disposals.
   
• However, after a quiet 1H26 in terms of contract wins, orderbook weakened to S$13.3b, offering no good revenue visibility beyond 12 months. 
   
• Downgrade to HOLD, with target price lowered to S$2.30 based on 1.05x 2026 P/B. Seatrium needs some sizeable contract wins in 2H26 to bolster investor confidence. Watch out for Petrobras P-88 tender outcome.
   

Analysis

• Core earnings beat expectations on improving gross profit margin. Seatrium’s 1H26 reported net profit of S$373m (+158% yoy) was boosted by sizeable one-off disposal gains. Excluding one-off items, core earnings of S$207m (+35% yoy) still beat our expectations, at 55% of our full-year forecast. The beat was mainly due to better-than-expected gross profit margins, up 1.2ppt yoy, driven by better project margin mix, operating leverage and cost efficiency. 1H26 gross profit margin was still impacted by a close-out provision (quantum not disclosed) for wind turbine installation vessel Maersk Viridis, excluding which, Seatrium’s 1H26 gross profit margin would have been even better.