It has been almost nine months since Indra presented its latest strategic plan in which, in addition to setting the target figures for 2030, they redesigned the structure they expected to have at the end of this period, clearly moving from a company focused on technology to one that lead the Defense segment in Spain and have one foot in Aerospace.
To do this they had to make a move. They needed to grow inorganically in these last segments and, to do so, they had decided to divest from the technological leg, Minsait, totally or partially depending on the possibilities of a market in which they were looking for purchases, among which Hispasat was always mentioned as the great possibility.
In any case, this clear commitment to the Defense and Aerospace sector, which until now was not the one that weighed the most in Indra’s accounts, responded to the fact that it was the niche where they anticipated the greatest growth due to the current situation, very marked by the increase in defense spending by European countries in a context of increasing tension from the wars in the eastern continent.
Along these lines, although in recent months the countries of the Old Continent have been increasing this item, they still need to do so to a greater extent. This is what the latest report on the sector prepared by analysts from BloombergIntelligence. According to this report, Europe’s majors have to double their investment in defense “to respond to Russia’s invasion and the possibility that the US will reduce its support for Ukraine under the Trump presidency.”
The 15 largest European countries that belong to NATO must increase what is allocated for this purpose from 340,000 million a year to 720,000according to these analysts. “Trump has threatened to leave the alliance if Europe does not increase its spending,” they recall. In his report, Draghi already warned that Europe had to increase its industrial capacity in this line to ensure the survival of the EU. Among the companies that benefit from this, in addition to Leonardo, Airbus or BAE Systems, would be Indra.
Proof that this greater concern for safety is already being noticed in Spain is that the Spanish industry, included in the TEDAE Association, increased revenue by 15% in 2023 compared to 2022, up to 13.9 billion, very close to the historical maximum. 2019. Within this group of companies is Indra, as well as Amper, Escribano or ITP Aero, among others. “It is positive news for the sector, which is going through a good moment favored by the need for NATO countries to increase their Defense budgets to meet the objective of reaching 2% of GDP,” they explain from Renta 4.
Thus, since the listed Spanish company announced this strategic shift, analysts have not stopped raising their valuations to 23.3 euros where they place it, on average, now. This target price leaves a journey to its titles of more than 40%. None of these analysis houses recommend selling stocks after a 17% rally in 2024 and 75% of them suggest it’s time to buy.
In their latest results they confirmed the guidelines for the year. “The fundamentals are good and in the medium term it benefits from the increase in defense spending in EU countries due to the conflict between Russia and Ukraine as the Spanish company has the greatest exposure to this sector with approximately 42% of the ebit,” they explain. at Bankinter. These objectives for the end of the year, let us remember, are revenues of 4.8 billion and an ebit of 415 million.
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