It has been almost nine months since Indra presented its last strategic plan in which, in addition to setting the numerical objectives for 2030, they redesigned the structure that they hoped to have at the end of this period, clearly moving from a company focused on technology to the one who is leader in the Defense segment in Spain and who has a foot in Aeronautics.
To do this, they had to act. They needed to grow inorganically in these latter segments and, to do this, they had decided to disengage from the technology branch, Minsait, totally or partially depending on the possibilities of a market in which they were looking to buy, among which Hispasat has always been mentioned as the great possibility.
In any case, this clear commitment in the Defense and Aerospace sector, which until now was not the one that weighed the most in Indra’s accounts, responded to the fact that it was the niche where the greatest growth was expected due to the current situation, very marked by increasing defense spending by European countries in a context of growing tension due to wars on the eastern continent.
In this sense, even if in recent months the countries of the Old Continent have increased this position, they still need to do so to a greater extent. This is what the latest report on the sector prepared by analysts at Bloomberg Intelligence. According to this report, European majors must double their investments in defense “to respond to the Russian invasion and the possibility that the United States will reduce its support for Ukraine under President Trump.”
NATO’s 15 largest European countries must increase their allocation for this purpose from 340,000 million per year to 720,000according to these analysts. “Trump threatened to leave the alliance if Europe did not increase its spending,” they recall. In his report, Draghi has already warned that Europe must increase its industrial capacity in this area to ensure the survival of the EU. Among the companies that will benefit, in addition to Leonardo, Airbus or BAE Systems, there would be Indra.
Proof that this greater concern for security is already visible in Spain is that the Spanish industry, included in the TEDAE association, increased its revenues by 15% in 2023 compared to 2022, up to 13.9 billion, very close to the historical maximum of 2019. Within this group of companies are Indra, as well as Amper, Escribano or ITP Aero, among others. “This is positive news for the sector, which is going through a good moment favored by the need for NATO countries to increase their defense budgets to achieve the objective of reaching 2% of GDP”, explain- they de Renta 4.
Thus, since the listed Spanish company announced this strategic shift, analysts have continued to raise their valuations to 23.3 euros where they place it, on average, now. This price target leaves a journey towards its titles of more than 40%. None of these analysis houses recommend selling stocks after a 17% rally in 2024 and 75% of them suggest it’s time to buy.
In their latest results, they confirmed the guidance for the year. “The fundamentals are good and in the medium term it benefits from the increase in defense spending in EU countries due to the conflict between Russia and Ukraine, since the Spanish company is the most exposed to this sector with around 42% of Ebit”, they say. explain to Bankinter. These objectives for the end of the year, remember, are a turnover of 4.8 billion and an ebit of 415 million.
