After another strong year in 2024 with 20% outperformance, the AandD investment proposition looks a bit more complex heading into 2025 and requires differentiation. In our annual review of the key sector debates, we aim to identify stocks with the best combination of value potential and momentum appeal. We reiterate our Defence push initiated in Dec and upgrade Thales to O/P and BAE Systems to Neutral. We stay positive on Rheinmetall, RENK, Dassault, as well as Airbus, Safran, MTU in Civil. The never-ending execution recovery - civil momentum cooling down a bit We see a quieter set-up in 2025, with continued recovery from execution difficulties. We expect a progressive shift of focus from engine ramp-up difficulties to execution in Aerostructures. We still see value in the segment: we reiterate our preference for Airbus and highlight long-term visibility at Safran and particularly positive momentum at MTU this year (FX, CMD, GTF normalisation). A busy year for Defence - value profile with many catalysts We double down on our December Defence call detailed in Another line of defence. We expect a particularly busy year, likely to confirm a sustained upturn in defence spending. This will be significantly influenced by the US geopolitical stance. The June NATO Summit is a potential key catalyst to see new defence spending commitments among member countries despite obviously complex budget equations. A possible ceasefire in Ukraine could provide an entry point. March to the sound of the guns - Thales raised to O/P with a TP of EUR176 (up from EUR156) Thales shares underperformed AandD by 20% in 2024. We think its value case now stands out, with an EV/EBIT multiple at a peak discount vs sector despite visibility on record organic growth rates driven by strong security needs in all its end markets, reducing ESG discount, and momentum that should reverse in 2025. Thales should benefit from solid leverage to the NATO defence spending hike (with no exposure to...