THALES : Jefferies upgrades its recommendation to 'buy
September 04, 2023 at 05:24 am EDT
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On Monday, Jefferies raised its recommendation on Thales from 'hold' to 'buy', with an upwardly revised target price of €140 to €160, representing a potential upside of 18%.
In a note published this morning, the teams from the American research consultancy hailed the shift towards cybersecurity by the defense electronics group.
According to its analysts, the French group now presents a 'more attractive' profile following the completion of two acquisitions that will enable it to accelerate its growth.
Jefferies also highlights the accelerating momentum of the Rafale, to which it is highly exposed, with the receipt of 18 new orders from Indonesia this summer, not counting purchase options on a further 18 aircraft, ahead of the 26 units to be delivered to India in 2024.
The research firm is also relieved by the materialization of factors that had been weighing on the stock, such as the loss of the Telesat contract, or the disappearance altogether of causes for concern, such as a possible acquisition of Atos.
He also notes that the Group's share buyback program is now well underway, with an end not scheduled before March 2024.
All these factors lead him to anticipate a "significant" improvement in the company's free cash flow (FCF) over the 2023-2025 period.
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Thales is one of the European leaders in manufacturing and marketing of electronic equipment and systems for the defense and security, aerospace, and transportation sectors. Net sales break down by product group as follows:
- defense and security systems (53.4%): 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 (28.4%): avionics equipment (cockpit, cabin multimedia, and simulation equipment), space systems (satellites, payloads, etc.);
- digital identification and security solutions (18.2%).
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 (29.5%), the United Kingdom (6.6%), Europe (24.8%), the United States and Canada (14%), Asia (9.4%), Near and Middle East (6%), Australia and New Zealand (4.4%) and other (5.3%).
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