Leonardo Maintains Full-Year Guidance as Recovery Tracks Along With Expectations

Narrow-moat Leonardo continues its path recovery as the group reports first-half 2021 results. Order intake of EUR 6.7 billion increased 9.5% year on year, with order growth in the electronics and aircraft divisions offset by declines in the helicopter and aerostructure businesses. All segments, except aerostructures, contributed to group revenue and EBITA growth of 7.9% and 37%, respectively. Group EBITA margin of 6.3% for the first half remains below the 8.2% prepandemic level as the aerostructure business remains loss-making due to low commercial aircraft deliveries. Guidance for EBITA growth of approximately 17% and positive free cash flow generation of EUR 100 million in 2021 is maintained. In the short term, the military and governmental business is expected to remain robust, while the civil aeronautics business will continue to be a drag on results. Over the medium term, group sales will be driven by the delivery of Typhoon fighter jets to Kuwait and a recovery in civil helicopter and aeronautics markets. Share price recovery has lagged peers and are currently trading at a deep discount to our fair value estimate of EUR 12.15.