Thales: Kepler Cheuvreux remains Buy

(AOF) – Kepler Cheuvreux remains Buy on Thales for a target price of 145 euros. Thales announced a 42% jump in order intake in the third quarter (+36% organically) to 4.24 billion euros and growth of +13.7% in turnover (+8.5% organically) to 4.04 billion euros. “These results are both well above consensus estimates (18% ahead for orders and 5% ahead for sales).” raises the broker.


Key points

– First or second in electronics for civil satellites, mission systems and sensors for defence, air traffic management, data protection and SIM cards and smart payments, created in 2020;

– Revenues of €17 billion from defense & security for 54%, aerospace for 28%, digital identity and security for 19% and civil aeronautics for 7%;

– International presence, 24% for France, 29% for other European countries, 14% in Asia, 12% in North America and 9% in the Middle East;

– Business model based on 4 pillars: the strength of R&D, at 20% of sales, synergies between businesses drawn from a deep knowledge of the markets, an extensive base of digital assets and a global presence in + 50 countries ;

– Capital locked by 2 shareholders in concert, Dassault Aviation (24.63%) and the French State (25.68%), Patrice Caine being Chairman and CEO of the 16-member Board of Directors;

-Sound financial position with debt rated A-, sharply reduced to €894m at the end of June compared to €7.6bn in equity.


– Strategy to refocus on aerospace, defense & security and digital identity & security;

– Innovation strategy supported by R&D close to 20%: global ecosystem bringing together 1/3 of the workforce, with a portfolio of more than 23,000 patents, 6 hubs, 3 digital factories and 50 academic partnerships / focus on 5 digital expertise: connectivity, big data, cybersecurity and artificial intelligence, via the aI@Centech program and the quantum approach TrUE AI;

– Low carbon environmental strategy: 25% reduction in direct CO2 emissions in 2023, 50% in 2030 (vs 2018) and net zero objective in 2040 / 100% eco-designed products and services in 2023 / loan launches green / 4 priorities: environmental management, flight optimization, air traffic management, training and signalling;

– Acceleration of activities, obtaining contracts and investments in defense and security (2/3 of estimated benefits) and aerospace (15%);

– Visibility with a record order book of €38 billion at the end of June, boosted by the entry into force of Rafale sales in the United Arab Emirates and, more generally, by Defense & Security needs.


– Effectiveness of reactions to continuing tensions in supply chains, in particular semiconductors, to inflation and the weakening of the euro against the dollar: resilience of supply chains, rise in power of recruitment and transfer to customers of increases in purchasing costs;

– Impact of advances in avionics and biometrics with the resumption of air traffic and then R&D investments in quantum sensors, cloud security and data processing in IoT;

– After a 30% jump in net profit and a 7.7% increase in sales, raising of 2022 objectives: order intake significantly higher than turnover, expected to increase by 3.5% to 5.5% and operating margin of 10.8 to 11.1%.

– Dividend of €2.56, paid with deposit and buyback of shares spread between April 2022 and March 2024.

The end of a duopoly?

For several decades, the American Boeing and the European Airbus have shared 99% of the world market for airliners with more than 110 seats. This market weighs more than 100 billion dollars per year. However, this duopoly seems to be weakened in 2022 for several reasons. First, for the first time, two medium-haul single-aisle aircraft, the Chinese Comac’s C919 and the Russian Irkut’s MC-21, are about to enter service. Added to this is the Boeing 737 MAX crisis. With the cessation of deliveries of this aircraft between 2019 and 2021, the production balance has been broken. In 2021 Boeing posted 340 deliveries, with Airbus remaining well ahead with 611.

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Thales: Kepler Cheuvreux remains Buy

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