Growing Air Travel Demand Will Spur Advanced Composite Adoption

Key Takeaways

• Industry trends toward fuel efficiency and sustainability are increasing demand for FACC's advanced composite products, improving its portfolio mix and profitability outlook.
  
• Operational efficiencies, new long-term contracts, and cost pass-throughs position FACC for stronger margins and diversified, more predictable revenue streams.
  
• Ongoing profitability and growth are threatened by exposure to volatile aircraft demand, input costs, customer concentration, operational risks, and disruptive industry shifts.

Catalysts

Engages in the development, production, and maintenance of aircraft components worldwide.

• The rapid growth in global air travel demand, evidenced by record passenger numbers and historically high airline seat utilization, is driving large backlogs and strong order pipelines at OEMs, resulting in robust and visible future revenue growth for FACC as a major aerospace supplier.
  
• Sustained industry momentum toward lighter, fuel-efficient aircraft-prompted by emissions regulations and sustainability demands-is accelerating adoption of advanced composite materials, directly supporting increased FACC content per aircraft and margin-enhancing product mix improvements in core and new portfolios.
  
• The ongoing digitalization and automation of manufacturing and supply chains, including FACC's strategic offshoring of interior production to Croatia and China, is yielding operational efficiencies and reduced unit costs-setting a foundation for boosted EBITDA and net margin expansion by 2026/2027.
  
• Successful renegotiation of supply contracts with major customers now enables FACC to pass on material cost inflation starting in 2026, effectively insulating margins from volatile raw material pricing and setting the stage for meaningful profitability recovery in Aerostructures.
  
• Deepened partnerships and multi-year contract extensions with key customers such as Rolls-Royce, alongside expansion in high-growth segments like Urban Air Mobility and drones, are broadening FACC's revenue streams and increasing order visibility-shoring up long-term earnings and supporting potential valuation re-rating.

FACC Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FACC's revenue will grow by 8.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.4% today to 5.4% in 3 years time.
• Analysts expect earnings to reach €62.7 million (and earnings per share of €0.92) by about August 2028, up from €3.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, down from 99.7x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 99.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.37%, as per the Simply Wall St company report.

FACC Future Earnings Per Share Growth

Risks

• FACC's financial performance remains vulnerable to cycles in global aircraft demand, as evidenced by customer-led order harmonization and delays that resulted in the company keeping underutilized staff on payroll and incurring material cost overruns-materializing as periodic revenue volatility and unplanned margin compression.
  
• Escalating input costs, particularly for specialized aerospace materials and fasteners, have depressed Aerostructures segment margins; since 2025 impacts cannot be recovered retroactively and only future price increases will be contractually mitigated, this signals lingering risk of margin pressure if similar supply disruptions or commodity price shocks reoccur.
  
• The company's reliance on a concentrated customer base (notably Airbus and Boeing), and high exposure to a limited number of commercial aircraft programs (e.g., A320 family-now 36% of revenues) continues to expose FACC to risk from OEM procurement shifts or insourcing, potentially resulting in revenue instability or lost contracts.
  
• Sustained improvements in operating margins and cash flow rely on successful execution of complex restructuring initiatives (inventory reduction, supply chain relocation to Croatia/China, and labor productivity improvement), which face execution risk and could falter due to unforeseen operational challenges, dampening net margin and earnings gains.
  
• While secular shifts toward composite materials and urban air mobility present growth opportunities, technological disruptions (e.g., alternative lightweight materials, additive manufacturing) or accelerated OEM push toward vertical integration/indigenization could undercut long-term demand for FACC's products, threatening both revenue growth and business sustainability.

Valuation

• The analysts have a consensus price target of €10.175 for FACC based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.0, and the most bearish reporting a price target of just €7.4.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.2 billion, earnings will come to €62.7 million, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of €7.11, the analyst price target of €10.17 is 30.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.