AVIO
🚀 Avio develops crucial propulsion motors for the European Space Agency’s rockets and assembles key components, positioning it uniquely in the space sector.
💥 A significant, rapidly growing part of its business involves missile defense systems (intercepting missiles, drones), a capability gaining importance due to recent geopolitical conflicts.
📈 Despite its small size causing it to be overlooked, Avio’s missile defense segment is projected to grow fivefold, significantly boosting overall profitability and value, with substantial share price gains already realized and more expected.
@CobasAssetManagement:
“And from Avio’s perspective, Avio makes the engines for, well, it works for the European Space Agency. The European Space Agency has two space rockets. For one space rocket, it makes the propulsion motors; for the other rocket, it does the assembly and the motors that rocket has. And it also has a missile business. The missile business, so everyone understands, is the type of missiles that intercept other missiles and drones, and planes too, to a lesser extent, but also. So now with the wars that have occurred in Israel and Palestine, between Ukraine and Russia, and in the Red Sea with the Houthis, well, it has been seen that this is a very, very relevant capability and that it has more importance than it used to have. So it’s a business that right now is only 20% of sales but is growing a lot. That is, we expect that in the coming years, the next 10 years, it will multiply by five. Of course, a 5x increase on 20% of sales is like 100% now, right? And that has a higher margin, and it’s a small company, which indicates why the market has been missing it until very recently. It’s still largely missing it. Why? Because it’s a company of, say, 400 million in sales, 20% of that is 80 million. Who pays attention to a company with 80 million [in that segment]? It has a space that is off the radar, it costs more to analyze it. It’s true that the space part of the company costs much more to understand. Well, nobody gets into that. So if you’re going to multiply by five and those margins are higher than those of the space [segment], well, you’re going to have a very, very significant extra profit there, which the stock price has already largely reflected; it has risen 80-90%, and there’s more to come. So the truth is, it’s very important because not only now that there’s so much talk about increases in defense budgets, there are items within the defense budgets that are going to increase much more because you need them much more on the battlefield or to defend your country. We are talking about the United Kingdom wanting, in its own country, to defend itself against any attack it might have; France, the same. They are, after the United States, the countries that contribute most to NATO; they are clients of this company. Then the United States wants its own anti-missile defense system, etc., and just to give you an idea, the defense area is 500 times larger than Israel’s. So we are talking about quantities that many people don’t imagine when they think about increases in the defense budget.”
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Read more articles analyzing Avio S.p.A. (AVIO) at the following link. AVIO stock.
