RADA Electronic Industries - Rising profitability drives upgrade
With a growing order backlog, significant operating leverage, improving working capital and an eye on new vertical markets, RADA is in our view a compelling proposition. Our revenue forecasts remain broadly unchanged following full year results. However, we have increased our EPS forecasts by 64.5% in 2021 and by 66.3% in 2022 as operating leverage becomes increasingly apparent. We raise our valuation to $17 from $12, supported by our DCF model and PEG ratio analysis.Rada Electronic Industries is an Israeli based defense electronics contractor that specialize in the development, manufacture and sale of data recording and management systems (such as digital video and data recorders, ground debriefing stations, head-up display cameras), inertial navigation systems for air and land applications, avionics solutions (such as aircraft upgrades, avionics for unmanned aircraft vehicles, ("UAVs"), store management systems and interface computers) and land radar for defense forces and border protection applications (active protective systems for armored fighting vehicles, hostile fire detection and perimeter surveillance).
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