UOB Kay Hian Private Limited
Date of Report: Friday, 22 August 2025
SATS Ltd 1QFY26 Earnings Review: Resilient Cargo Growth and Upbeat Outlook Signal Value in Aviation Gateway Leader
Executive Summary: SATS Ltd Delivers Steady 1QFY26 Performance Amid Global Volatility
SATS Ltd, a dominant player in Asia’s food solutions and a global powerhouse in aviation gateway services, reported solid results for the first quarter of FY26. The company’s net profit climbed by 9.1% year-on-year (YoY), with revenue advances driven by robust cargo and gateway services, despite wider macroeconomic uncertainties and tariff volatility. SATS’ management remains bullish on long-term growth, underpinned by strong contract wins, resilient cargo volumes, and strategic capital management.
Stock Snapshot and Valuation Metrics
| Share Price |
Target Price |
Upside |
Market Cap |
Major Shareholder (Temasek) |
GICS Sector |
| S\$3.26 |
S\$3.52 |
+8.1% |
S\$4,869.1m |
40.0% |
Industrials |
1QFY26 Financial Highlights: Outperformance in Cargo and Gateway Services
| Metric |
1QFY26 |
1QFY25 |
YoY Change |
4QFY25 |
QoQ Change |
% of FY26 Forecast |
| Revenue (S\$m) |
1,506.3 |
1,370.4 |
+9.9% |
1,476.7 |
+2.0% |
25.5% |
| EBIT (S\$m) |
125.2 |
112.9 |
+10.9% |
108.3 |
+15.6% |
25.7% |
| Net Profit (S\$m) |
70.9 |
65.0 |
+9.1% |
38.7 |
+83.2% |
27.3% |
| Core Net Profit (S\$m) |
70.9 |
68.9 |
+3.0% |
44.4 |
+59.7% |
27.3% |
Key drivers of the positive earnings momentum include:
- Contract renewal with Singapore Airlines (SIA), which contributed positively after being absent in 1QFY25.
- Frontloading of e-commerce air cargo into the US from China and Hong Kong, ahead of the US’s removal of de minimis tax exemption.
- Strong cargo volume growth, consistently outpacing industry averages for the seventh consecutive quarter.
Segmental Analysis: Food Solutions and Gateway Services
| Segment |
1QFY26 Revenue (S\$m) |
YoY Change |
1QFY26 EBIT (S\$m) |
YoY Change |
| Food Solutions |
328.3 |
+5.6% |
28.5 |
+16.3% |
| Gateway Services |
1,178.0 |
+11.2% |
101.9 |
+25.5% |
Cargo revenue surged by 12.2% YoY, supported by a 10.4% YoY increase in volume and a 1.7% YoY improvement in average selling prices for cargo handling.
Aviation meal production climbed by 5.8% YoY, reflecting the persistent uptick in regional passenger air travel.
Non-aviation meal volume fell by 11.0% YoY, mainly due to operational consolidation in China.
Operational Excellence: Cargo Volumes Outperform Market
– SATS’ cargo volume by tonnage grew 10.4% YoY in 1QFY26, far surpassing the International Air Transport Association (IATA) industry average of 2.9% YoY for the same period. – In North America, despite a challenging environment, SATS achieved 1.0% YoY growth in cargo volume, against an industry-wide volume drop.
Financial Position: Gearing and Capital Management
– Net gearing (excluding leases) improved to 64.4% at end-1QFY26 from 66.6% at end-FY25, as SATS continues to reduce debt. – Management is actively working on a capital return enhancement plan to balance dividends, growth capex, and debt repayment, with updates expected later in the year.
Outlook: Management’s Upbeat Tone and Key Catalysts
– Management expects SATS to outperform industry benchmarks, leveraging global reach, network effect, and robust customer relationships. – The food solution segment stands to benefit from rising regional demand for authentic, high-quality aviation meals. – The gateway segment remains resilient, buoyed by a strong pipeline of new contract negotiations and recent customer wins such as Cathay Pacific, Emirates, Riyadh Air, and Turkish Airlines. – 2QFY26 cargo performance is expected to remain robust, with particular strength in the European market and signs of improvement in US-bound cargo demand.
Key Risks
– Weaker-than-expected global air cargo volumes due to ongoing tariff uncertainties. – Potential impact from a global economic slowdown.
Valuation and Recommendation
– The recommendation to BUY is maintained, with an upgraded target price of S\$3.52, pegged at 18.4x FY27F PE (0.5 standard deviation below the historical mean PE of 19.7x). – SATS currently trades at 18.9x FY26F PE and 17.0x FY27F PE, below historical averages, suggesting attractive entry points for long-term investors. – Key catalysts include organic market share gains and potential bolt-on acquisitions.
Key Financials Summary
| (S\$m except per share) |
2024 |
2025 |
2026F |
2027F |
2028F |
| Net turnover |
5,150 |
5,821 |
5,918 |
6,083 |
6,339 |
| EBITDA |
781 |
1,036 |
1,060 |
1,091 |
1,141 |
| Operating profit |
244 |
476 |
488 |
503 |
529 |
| Net profit (reported) |
53 |
244 |
260 |
288 |
323 |
| EPS (S\$ cent) |
5.3 |
17.3 |
17.3 |
19.1 |
21.4 |
| PE (x) |
61.9 |
18.9 |
18.9 |
17.0 |
15.2 |
| Dividend yield (%) |
0.5 |
1.5 |
1.9 |
2.4 |
3.0 |
| Net margin (%) |
1.0 |
4.2 |
4.4 |
4.7 |
5.1 |
| Net debt/equity (%) |
80.2 |
66.6 |
57.5 |
46.9 |
37.3 |
Conclusion: SATS Positioned for Long-Term Outperformance
SATS Ltd enters FY26 with positive momentum, highlighted by resilient cargo volumes, growing aviation meal demand, and disciplined financial management. The company’s valuation remains attractive relative to historical averages, and management’s proactive approach to capital returns and contract expansion sets the stage for sustained growth. While global uncertainties persist, SATS’ operational strengths and market positioning make it a compelling pick for investors seeking exposure to Asia’s aviation and food solutions sectors.
