On Monday, Citi initiated coverage on Dassault Aviation SA (AM:FP) (OTC: DUAVF) stock with a Buy rating and a price target of €230.00. The new coverage is based on the firm's belief in the underlying value of the company, despite recent low delivery levels.
The aerospace industry has been facing supply chain constraints, but Citi expects Dassault Aviation's delivery of Rafale fighter jets and Falcon business jets to see a significant increase in the next two to three years. This increase is anticipated to drive approximately a 30% compound annual growth rate (CAGR) in earnings before interest and taxes (EBIT).
There is a substantial multi-year backlog for the Rafale jets, and the expectation is that there could be further large orders from countries such as India and the Middle East.
While there is a short-term cautious outlook on the business jet supply chain, the demand for Falcon jets is projected to grow, with deliveries expected to rise to more than 50 per year throughout the decade.
Citi also notes Dassault Aviation's strong financial position, highlighting the company's substantial net cash situation as a reassurance for investors. The price target of €230.00 is based on a discounted cash flow (DCF) analysis.
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