(AOF) – Safran (+2.74% to 224.90 euros) recorded one of the strongest increases in the CAC 40 after Jefferies’ increase in recommendation. The broker moved from “Buy” to “Hold” and increased its price target from 230 to 260 euros. “Following the 2024 investor day and the decline in recent months, we are upgrading Safran to Buy on the basis of strong EPS growth (21% average growth rate for 2023-2028), justifying a multiple higher than that which we had previously taken into account”, explains the broker.
“The aeronautical equipment manufacturer is expected to benefit from significant EPS growth thanks to continued strong trends in the aftermarket, at an exchange rate that has become significantly more favorable over the past month, leading to leverage of around 700 million euros on the 2028 Ebit objective”, adds Jefferies.
With the conservatism on CFM56 turnover and the exchange rate assumption, Jefferies significantly exceeds Safran’s objectives for 2028 (7.1 billion euros compared to 6.0-6.5 billion euros).
“Our main concern with Safran was free cash flow expectations, which we considered to be too high given the upcoming consumption on the Rafale. With the signing of the Indian Navy order apparently imminent, this should boost the outlook for free cash flow towards the top of the range of 2.8 to 3 billion euros planned for 2025 thanks to a first deposit,” explains Jefferies.
Last December, Deutsche Bank also raised its recommendation on Safran shares from “Hold” to “Buy” with a price target raised to 243 euros from 214 euros.
“In our opinion, the board of directors expressed such confidence in Safran’s ability to generate cash in the next 4 to 5 years that it was prepared to return 5 billion euros to investors while investing in new “This is unprecedented in Safran’s history and indicates that cash generation is improving rather than deteriorating,” Deutsche Bank said.
Safran will publish its annual results on February 14. In 2024, Safran is targeting current operating income of around 4.1 billion euros and free cash flow of around 3 billion euros.
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