UBS raises its recommendation for defense company Saab to buy from neutral. The target price is raised significantly to 525 kronor from 250. The share rises 3.1 percent to 391.95 kronor last paid.
The Swiss bank believes Saab is well positioned to benefit from increased defense spending and raises its recommendation to buy despite the recent price increase.
"We believe the ground combat portfolio, including the Carl Gustaf recoilless rifle, and the surveillance portfolio, including the Giraffe air defense radar, are very well positioned to benefit from sales increases in the near term," it said in an analysis.
Meanwhile, the recommendation for Italian defense company Leonardo is lowered to neutral from buy. The target price is raised to 50 euros from 31.
The company is expected to benefit from the major defense build-up underway in Europe. At the same time, the recommendation is lowered due to the recent price increase.
"We believe that management's actions over the past two years, including the dividend increase and efforts to reduce exposure to the B787, have improved the company's returns from the perspective of minority shareholders, but that these efforts are now reflected in the share price," UBS writes.
SAAB AB is a world leader in the design, manufacturing and marketing of defense and security systems and equipment for military, space and civil sectors. Net sales break down by family of products and services as follows:
- electronic defense systems (33.4%): radars, sensors, submarine and terrestrial airborne surveillance systems;
- armament equipment and systems (25.6%): military equipment, missile systems, weapon systems, ammunition, armed forces identification systems, camouflage systems, etc. The group also provides security and defense solutions (combat systems, training, simulation, security and communication solutions, air and sea traffic management systems, etc.);
- aeronautical systems (24%): military aircraft, combat aircraft, avionics, etc.;
- naval systems (11.8%): submarines, combat ships, underwater mine detection systems, etc.;
- support services (4.2%): provision of services in the areas of systems development, integration and security, information security, communications, technical information, logistics, etc., and technological consulting in the fields of aviation, defense, telecommunications, etc.;
- other (1.1%).
Net sales are distributed geographically as follows: Sweden (41.1%), Europe (25.8%), North America (8.9%), Asia (7.4%), Latin America (4.3%), Australia (3.8%), Africa (0.6%), and other (8.1%).
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