Airbus group: Airbus’ stock market discount against Boeing is excessive, according to Stifel

(BFM Bourse) – The design office has resumed its coverage of the European aeronautics and defense group, with advice on purchase and a target price of 165 euros. The company has an order book with strong visibility and excellent pricing power.

While Airbus has been able to disappoint the market in recent months, with an abandoned end-2022 delivery target and the removal of an intermediate A320 production target that was sanctioned last month, Stifel believes its stock is attractive.

The design office thus resumed coverage of the value on Wednesday with advice on the purchase and a target price of 165 euros. On the Paris Stock Exchange, the Airbus share rose 0.8% to 133.6 euros and signed one of the largest increases in the CAC 40 at the end of the session.

For Stifel, the evolution of the title will be linked to a “family affair”, and more precisely the A320 neo family, the group’s “cash-cow” and its best-selling single-aisle aircraft. The ramp-up in production of these aircraft will be the main vector for improving Airbus’ results and increasing its aircraft deliveries.

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Deliveries that take off

Stifel estimates that after 661 units last year, deliveries will start to rise again, reaching nearly 1,000 in 2025. Beyond volumes, profitability will benefit from a growing proportion of A321 neo aircraft, with better margins than the A320 neo. The bank notes that the consensus is still counting, on deliveries, on a 50/50 split between the A321 neo and the A320 neo beyond the year 2025, while the order book is more on a 60/40 ratio.

“As far as we are concerned, Airbus is the very example of post-pandemic recovery” and the company can claim “an order book of more than ten years and ‘pricing power’ (power to set prices). price Editor’s note) practically unprecedented”, also writes Stifel.

The bank anticipates growth in adjusted operating profit, the group’s main indicator of profitability, of 20% on average per year between 2022 and 2025. Above all, it considers that Airbus is currently trading at too great a discount compared to its big rival. American Boeing. It thus judges that the market does not sufficiently take into account the improvement in its profitability, its conversion of results into cash flow, and the improvement in the mix of aircraft in its deliveries.

Stifel also resumed monitoring Safran on Wednesday with a recommendation to “keep”. While it recognizes that the group has a dominant position in single-aisle engines, the bank believes that the valuation already reflects the group’s strengths well.

But not necessarily the fact that Safran tends to buy companies that have a dilutive impact on its margins. As such, the design office is not very enthusiastic about last month’s announcement. Safran then indicated that it wanted to buy the actuation and flight control activities of Collins Aerospace for 1.8 billion dollars. Stifel would have preferred that Safran complete the restoration of the margins of its “interiors” division created following the acquisition of Zodiac Aerospace in 2018, before carrying out a major external growth operation.

Julien Marion – ©2023 BFM Bourse