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Russia-Ukraine war continues to drive spending (R: +7%, U: +57%). Saab's strategic markets see growth: Sweden + 13%, Europe +20%. Growth to continue in '24 before normalising, but already priced in.
Saab Saab AB Class B
Tail chaseWe have made major upgrades to our forecasts for Saab: these reflect our realisation that we had underestimated both the scale and likely duration of European rearmament as a consequence both of the war in Ukraine, and the possible re-election of President Trump.We now expect the European rearmament cycle to extend through the end of the decade, with possible peak defence stock valuations likely no earlier than end-2028e.4 consecutive years of a book to bill >1.0x have taken Saab’s backlog to a record SEK153bn.And the company’s business mix has changed materially: we forecast Dynamics and Surveillance together to account for 80% of our forecast growth in revenues to 2028e, and 90% of EBIT growth over the period.This means that Saab’ is less dependent on “mega-orders” of large platforms (especially Gripen and submarines) – these could increasingly be a bonus, but are no longer vital to the investment case, whereas radars and weapons have become so.Our significantly-revised forecasts drive large increases in our target prices:We increase our 12-month target from SEK475 to SEK927, giving 5% upsideOur 3-year price target increases from SEK531 to SEK1036, giving 17% upside.We raise our rating from Hold to BuyNext event: Q1 Results, 26 April
We address investors' main questions regarding SAAB. We examine the order momentum endurance and margin potential. Good but seasonally weak Q1e: orders down 13%, sales up 16%.
Dutch SEK 40-60bn submarine order awarded to French Naval Group. Likely limited impact on '24e-'26e consensus for Saab Kockums. Again calls into question Saab's ability to land “mega-deal” projects.
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