Oddo BHF reiterates its "outperform" rating on Thales shares, along with its €275 target price, following a roadshow at which CFO Pascal Bouchiat expressed confidence that Thales is entering a long phase of growth in its defense business.
We found the tone on France reassuring, as short-term political uncertainty is not sufficient to dampen the strength of the growth cycle in defense, the analyst says.
Likewise, the broker believes that the resumption of growth in cyber should be reassuring and demonstrate that all of Thales' end markets will have returned to a growth trajectory by Q3.
After this summer's correction (-18.5% since the peak on June 5), Thales offers an attractive valuation with a rolling 12-month P/E of 21.7x (i.e. an 11% discount compared to European peers) and an FCF yield of 4.7%, he adds.
Thales is one of the European leaders in manufacturing and marketing of electronic equipment and systems for the aerospace, defense and security sectors. Net sales break down by product group as follows:
- defense and security systems (53.3%): C4I defense and security systems (control and monitoring systems, communication, protection, cyber-security, and other systems), defense mission systems, naval systems, electronic war systems, drones, air operation systems (air defense, air surveillance), ground defense systems and missiles;
- aerospace systems (26.6%): avionics equipment (cockpit, cabin multimedia, and simulation equipment), space systems (satellites, payloads, etc.);
- digital identification and security solutions (19.9%);
- other (0.5%).
Besides, the group owns a 35% stake in Naval Group (manufacture of naval equipment for defense and nuclear energy sectors).
Net sales are distributed geographically as follows: France (28.8%), the United Kingdom (6.6%), Europe (25.1%), North America (14.2%), Australia and New Zealand (4.6%) and other (20.7%).
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