Saturday, December 4

Opportunity at Indra. Afghanistan will push Europe to spend more on defense


Indra will be the great beneficiary of the Spanish stock market due to the increase in European investment in defense. It is a sector that has always been especially positive for the group and will now accelerate the share’s stock market trajectory, which is at its highest for the year.

After the results of the first semester, the market began to see clearly that Indrá was on the way to exceed its objectives for 2021. And these expectations were confirmed with the figures for the third quarter, which showed an increase in net profit to 115 million euros .

Thus, the company communicated to the CNMV on Tuesday an increase in its objectives for 2021. Now, the group expects to invoice more than 3,300 million euros and achieve a reported ebit of 230 million, with a cash flow of more than 140 million.

In addition, Indra announced the return of dividends, which had been suspended since 2014, with the payment of 0.15 euros per paying share from July 2022.

Defense spending as a catalyst for Indra

The strong improvement in results justified the increase in business guidelines and the return of remuneration to shareholders. But the catalyst that will accelerate this new momentum in the future will be investment in defense.

“After what has happened in Afghanistan, we believe that there has to be more investment in defense because Europe cannot allow itself to be idle,” he said. Ignacio Mendez, director of analysis at Mirabaud Research Spain, in the podcast of closing of markets of Finanzas.com.

The geopolitical context favors Indra

Indra’s portfolios are at maximum levels and the defense and air traffic part has never raised doubts, beyond the impact that the pandemic caused on the group’s businesses.

While the European economies are moving towards normalization, the geopolitical context provided an opportunity for Indra, after the departure of the USA from Afghanistan. But it is no longer just about defense but about technological leadership for the Old continent.

“The problem is that Europe is losing technological leadership to China and the USA, so one of the ways to recover it is investment in defense, whether we like it or not, ”he stressed. Mendez.

Indra, a leading defense giant

In this sector, Indra has multiple levers to boost its activity. The group specializes in solutions for airspace surveillance and control, as well as cybersecurity and space technology applied to military operations.

The company is the coordinating company in Spain of the future Eurofighter program and defense system (FCAS). “This can be a source of positive surprises in the hiring and new projects that will bring more visibility to a strong important income”, said the analysts of Sabadell Bank.

Since the summer began, Indra has been fine-tuning its defense machinery by signing different contracts with Eurocontrol, the German Defense Ministry or the Air Force.

These hires “provide visibility and continuity to the company’s growth path,” they stressed in Sabadell Bank.

Recovery funds will also add to Indra

It is true that the Technology (IT) part has always had low margins and has not generated cash, but “with the pandemic the cost part was greatly adjusted,” Méndez recalled. But now, this division, known as Minsait, is also prepared to add quality.

“The focus on projects with higher added value, with higher margins, is being reflected, especially in the division of Minsait“, said Ivan San Felix, Renta 4 Banco analyst.

Among the positive catalysts identified by the analysts consulted, the European reconstruction funds “next generation” they also play an important role.

One key “is going to be digitization and we must not forget that Indra is the government’s consultancy, which will generate a very important revenue visibility, with margins that have improved significantly,” he recalled. Mendez.

The dividend returns to Indra

With these business projections and debt in a comfortable position, Indra announced on Tuesday a dividend of 0.15 euros per share.

Thus, Indra’s dividend yield will be around 1.57 percent, as calculated by the consensus of finance.com analysts.

These are modest figures for the company but they also represent “a sign of confidence” after a suspension of more than seven years, explained the sources consulted.

The new executive leadership brings calm to Indra

Finally, the experts consulted assessed the end of corporate uncertainty after the latest changes in Indra’s top management.

The new board of directors headed by Marc Murtra, Cristina Ruiz and Ignacio Mataix brought calm after months of heavy punishment on the stock market.

“The springs of Indra’s corporate governance have worked to a certain extent. In other words, the new president has not been allowed to be CEO and an attempt has been made to diversify the management, ”said Méndez.



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