With a drop of more than 30% since the start of the year and a fall of almost 35% since its annual peak on January 20, Thales is one of the poor pupils of the CAC40 index. Given its status as a defensive value, one could have expected better for this action. This was without counting on the health context, which penalized the group on several levels. In its last financial communication dated April 28, the firm led by Patrice Caine thus indicates that the crisis will have a “very significant impact” on its half-yearly results. Already, the shortfall linked to Covid-19 on turnover for the first quarter has been estimated at around 200 million euros, including 60 million linked to civil aeronautics activities and 140 million linked to other activities, mainly due to losses in production efficiency. In total, revenues for the period amounted to 3.9 billion euros compared to 3.4 billion in the first quarter of 2019, up 16% based on published data, and down 4.7% at scope and rate. constant exchange rates. Corrected for the estimated impact of the disruptions caused by the coronavirus crisis, sales are growing slightly, in line with expectations. In terms of commercial activity, Thales reports order intake of 2.66 billion in the first three months of 2020, down 15% on a comparable basis. The impact of the disruption caused by the epidemic is estimated at 190 million over the quarter. In other words, order intake would have dropped 8% without the Covid-19. This is nothing unusual in terms of the natural volatility of large contracts.
The order book remains very full
By learning about Thales’s business indicators, one cannot help but think that investors are over-pessimistic. They take literally the very cautious discourse of the electronics management. If we remember the huge air gap that is emerging in aeronautics, we can understand them. But the weight of this sector is quite limited: barely 12% of global billings. Especially since Gemalto joined the perimeter, Thales has a wide variety of outlets. Transport, defense, aerospace, digital security and identity are the main sectors addressed. Order cancellations are relatively limited. On the other hand, a shift in billings over the next quarters is to be feared. Reason why the group refuses to deliver the slightest prospect for this year. On the other hand, the message is rather optimistic on the fundamentals in the medium term thanks to a high added value on its businesses, a positioning on promising outlets and likely to be supported in the coming weeks by the government stimulus plans, particularly in the automotive and aeronautics. Finally, the balanced international dimension of Thales and the fact that principals are often States limit fears about the order book. At $ 33.84 billion at the end of last year, it represented just under two years of activity. For this year, the consensus of financial analysts collected by Factset anticipates a 20% decline in current operating profit and net profit from a 7.2% decline in turnover before a significant recovery in these parameters from 2021. Thales capitalizes today less than 10 times the profit estimates for next year. A poor multiple for this solid group, present in future sectors.
Our advice: strengthen Thales to 60 euros. Those who are not positioned on the file can form a line around the same price limit. Isin code: FR0000121329.
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