Elbit Systems: well-positioned global defence play (BUY - initiation of coverage)

We initiate coverage of Israel’s largest defence contractor, Elbit Systems (Elbit), with a 12M price target (PT) of USD 206.0/share and a BUY rating. Established in the 1960s and following decades of R&D, M&A and investments, currently, Elbit is a well-established global defence electronics contractor, with c.80% of its revenues generated outside Israel (predominantly from Asia-Pacific, North America and Europe). Elbit’s main activity area is C4ISR (including electronic warfare and command control systems), airborne systems (avionics and others), land systems (artillery, smart munitions), and Electro-Optics. Historically, c.90% of the company’s sales have come from the defence space and the rest from the commercial market. Elbit has several subsidiaries and local JVs in countries including Australia, Brazil, the US, the UK, Germany and India, and is engaged in multiple US DoD programmes (including Lockheed’s F35). The main pillars of Elbit’s strategy are geographic expansion and product portfolio diversification (with a focus on defence electronics), supported by R&D and synergistic M&A. Despite four acquisitions in the US and Israel since 2018 (having ramped up its capex), the company’s ND/EBITDA remains below 2.3x.