The ugly duckling has become a swan
Thales was the ugly duckling of the aerospace & defence sector for many years. However, it delivered organic growth in 2015 for the first time in six years, is closing in on its 9.5-10% EBIT margin target and has won a number of high-value contracts. Its transformation into a swan has seen the stock trading up 32% ytd (vs the SXP -4.5%), on a premium rating of 19.1x FY17e compared to the sector average of 16.5x. Thales’s adaptation into a streamlined, competitive technology company with growing emerging market exposure is well rated, but further catalysts are required.Thales is an electronics and systems group, serving defense, aeronautics, transport, space and security markets. Co.'s operations can be divided into four operating segments: Aerospace (Avionics, Space), Transportation (Ground Transport Systems), Defence & Security (Secure Communications & Information Systems Land and Air Systems, Defence Mission Systems), and DCNS. Co. designs and delivers systems for all four environments: air, land, sea and space. These systems detect and assess threats, manage information, support command decisions and control engagements through to threat neutralization. Co. is active in ground transportation; air transport; navigation systems.
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