How to invest in Thales shares? – 04/12/2022 at 10:49

Growth levers, assets, strategies, financial indices and stock market performance. We have analyzed the action Thales, an expert in aeronautics, defense and security, in the current war context in Europe.

Presentation of Thales: strategy and strengths of the group

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Thales is one of the world leaders in the manufacture and sale of electronic equipment and systems. The group’s ambition is to provide the aerospace, defense, security and land transport industries with solutions to make smarter decisions in highly complex environments. This is why his strategy is to place himself on the entire chain of critical decisions where his intelligent systems are of great help. This value chain is divided into:

Data acquisition from radar, sonar, electromagnetic sensors, network monitoring sensors, satellites, drones, etc.

The transmission and storage of data via secure communication networks, radio, satellite communications and secure data centers.

Information processing and decision making through command and control systems, air and rail traffic monitoring, mission systems, advanced information processing solutions (images, video, semantics), data fusion, jamming, missiles and armaments.

Thales has many competitive advantages

Thales has a state-of-the-art R&D department to harness a global innovation ecosystem. Thales dedicates over 3.5 billion euros – almost 22% of its 2022 turnover – to research and development, of which 1 billion euros is self-financed. The group has 28,000 engineers engaged in research and development on a daily basis. In 2021, Thales collaborated with nearly 50 university research centers around the world and was ranked for the fourth time among the 100 most innovative companies by Thomson Reuters. The group now has 16,500 patents.

Thales builds and develops unique digital skills around four core technologies that play a key role in the critical decision chain: connectivity and mobility, big data analytics, artificial intelligence, cyber security. In recent years, Thales has significantly strengthened its expertise in these sectors through targeted acquisitions and recruiting industry experts.

Thales demonstrates a deep understanding of its markets. Thales focuses on five end markets that have many technologies and areas of expertise in common: aeronautics, space, defense, security and ground transportation. In virtually all of its businesses, Thales is among the top three in the world or number 1 in Europe.

Thales has a global presence. The group is present in more than 68 countries and has nearly 80,000 employees worldwide. His long experience on international markets and his complex collaborations prove to be an essential commercial asset.

On a commercial level, 2021 was characterized by an increase in the order book of over 18% to reach a value of 19.9 billion euros. Thales has won several contracts worth over 500 million euros: the sale of Rafales to Egypt, the maintenance contract for Mirages 2000 and the contract for the French air defense system.

In 2019, Thales joined forces with Gemalto, a Dutch leader in digital security, in a merger agreement for a valuation of 4.8 billion euros. This merger is in line with Thales’ strategic ambition to be a world leader in digital and cyber security, on a portfolio of solutions including security software, biometrics expertise, multi-factor authentication and secure communications transmission.

Activities of the Thales group, expert in aeronautics, defense and security

The group sells its solutions and services in several distinct segments.

aerospace

The aerospace segment provides aircraft manufacturers, the military and airlines with the task of improving flight efficiency, safety and comfort. The systems designed by Thales allow aircraft to fly in all conditions and interact with all parts of the aeronautical ecosystem, on the ground or in flight. At the space level, this segment also aims to design, develop and implement orbital infrastructures, satellite systems and related services for space programs. Thales is the only aerospace company in the world to hold positions in both on-board equipment (e.g. avionics and cabin systems) and ground (e.g. radar and air traffic management systems). The group is present in all types of civil and military aircraft and in all new major aeronautical programs.

Ground transportation

The land transport segment offers railway companies signaling, control and monitoring solutions for urban transport and ticketing networks to optimize the capacity and efficiency of land transport in optimal safety conditions, while offering a better service to travelers. Thales has great experience. The group has implemented signaling for 85 metro lines in more than 40 cities and is the inventor of the main railway signaling standards: CBTC (communication-based train control) for the metro and ETCS (European train control system) for trains. of the main lines.

security and defense

The Security and Defense segment provides communications, command and control systems, network infrastructure systems, and cyber security and security solutions for the military to achieve and maintain decision-making and operational superiority in conventional theaters, urban warfare and cyberspace.

Digital identity and security

The digital identity and security segment allows, at the request of companies and governments, to protect the billions of digital interactions they have internally and with the outside world. Thales provides identity management and data protection technologies that help banks secure fund transfers and biometric solutions to cross land borders. More than 30,000 organizations rely on Thales solutions to verify the identity of people and objects, guarantee access to digital services, analyze large amounts of information and encrypt data.

Thales, the electronics group is present all over the world

The Thalès group generates its turnover mainly in Europe (55.5% turnover in 2020) but also in Asia (13.6% turnover in 2020) as well as in the Middle East (7.1% turnover in 2020), in North America (11, 5% turnover in 2020), Australia and New Zealand (5.8% of turnover in 2020) and the rest of the world (6.5%).

Analysis of the latest results from Thales

The Thalès group had a good year 2021, especially at a commercial level.

Order intake: € 19.9 billion, up 18% (+ 18% on an organic basis)

Revenues: € 16.2 billion, up 5.3% (+ 5.3% on an organic basis)

EBIT: 1,649 million euros, up 32.1% (+ 31.9% on an organic basis)

Adjusted net profit, Group share: € 1,361 million, up 45%

Consolidated net profit, Group share: € 1,089 million, up 125%

Operating free cash flow: € 2,515 million, or 185% of adjusted net profit, Group share

Thales dividend at € 2.56, up 45%

Thales targets for 2022

Book-to-bill greater than 1, supporting accelerated sales growth in 2023

Revenues between € 16.6 and 17.2 billion, corresponding to organic growth of between + 2% and + 6%

EBIT margin between 10.8% and 11.1%

Cash generation target 2019-2023 revised upwards

Conversion ratio of adjusted net profit to free operating cash flow: 115%

Approximately € 5.5 billion of free operating cash flow forecast for 2021-2023

The Thales stock has outperformed the CAC 40 since the beginning of the year (+ 50% vs -7.4%). The Thalès stock benefits from positive news about the war in Ukraine and rearmament announcements to address possible new conflicts. This is the case of Germany which this year will release an “exceptional” envelope of 100 billion euros.

Technical analysis of the Thales share

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stock market coffee

In the medium term, the trend is positive. Thales stock is moving in this bullish channel (grayed out on the chart) that started in late February (and war announcements in Ukraine). In the short term, the trend is quite negative: the Thales stock price is moving below its 20-day moving average (thin blue line on the chart) and the MACD is below its signal line. However, the Stochastic RSI is in the oversold zone, so a technical rebound is possible in the coming days.

Our opinion on the Thales share

While Thales was already showing excellent growth among defense industry players, the start of a war in Europe acted as a catalyst, thanks to a willingness to massively accelerate budgets in some countries, particularly Germany. With this in mind, the defense and security specialist has many good years ahead of him.

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