European Defense Spending And Automation Will Transform Future Markets

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AnalystConsensusTarget
Consensus Narrative from 11 Analysts
Published
16 Mar 25
Updated
08 Aug 25
AnalystConsensusTarget's Fair Value
€94.82
10.1% undervalued intrinsic discount
08 Aug
€85.25
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1Y
148.5%
7D
-7.0%

Author's Valuation

€94.8

10.1% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Last Update06 Aug 25
Fair value Increased 5.67%

Upgraded consensus revenue growth forecasts and a sharp increase in expected future P/E have driven a higher analyst price target for Hensoldt, rising from €89.73 to €94.82.


What's in the News


  • Shareholders approved a €0.50 dividend per share at Hensoldt AG's Annual General Meeting.
  • Hensoldt is exploring strategic alternatives, including a potential sale, for its South African optronics business with Deloitte advising.

Valuation Changes


Summary of Valuation Changes for Hensoldt

  • The Consensus Analyst Price Target has risen from €89.73 to €94.82.
  • The Future P/E for Hensoldt has significantly risen from 30.67x to 43.87x.
  • The Consensus Revenue Growth forecasts for Hensoldt has significantly risen from 15.9% per annum to 17.7% per annum.

Key Takeaways

  • Rising defense budgets and Europe's strategic procurement boost Hensoldt's multi-year revenue, backlog, and earnings growth, especially through transformative, tech-focused programs.
  • Enhanced operational efficiency, innovation in modular systems, and global diversification improve margins, recurring revenue, and reduce regional risk exposure.
  • Heavy reliance on German and European defense budgets, uncertain international growth, and execution risks threaten revenue stability, margins, and Hensoldt's long-term geographic diversification.

Catalysts

About Hensoldt
    Provides sensor solutions for defense and security applications worldwide.
What are the underlying business or industry changes driving this perspective?
  • The upcoming approval and substantial increase of Germany's defense budget to 3.5% of GDP, coupled with Germany's role as the anchor customer for European defense, gives Hensoldt multi-year visibility into significant order inflows. This is expected to materially boost the company's order backlog and revenue growth as major procurement programs are officially launched from late 2025 into 2026 and beyond.
  • A rapid ramp-up in European conventional and technological defense spending-particularly for advanced sensors, radars, and electronic warfare-positions Hensoldt to benefit from transformational programs like the Eurofighter, TRML-4D, and new ground-based systems, supporting higher top-line growth and improved earnings potential through a richer, more technology-oriented product mix.
  • Operational scaling and automation initiatives (including the new logistics center and Oberkochen site) are addressing previous production bottlenecks and are expected to directly support margin expansion and sustained profitability as volume increases materialize from higher order flow and multinational contracts.
  • Hensoldt's integration of software-driven, modular systems (e.g., software-defined defense, AI-enabled data analytics, and lifecycle service contracts) is likely to enhance margins and generate stickier, recurring revenue streams, further improving earnings quality and cash flow as the product-service mix shifts over time.
  • The company's deepening involvement in cross-border defense initiatives (such as frameworks where other European nations join German-led procurement) and growing export traction in regions like the Middle East and Asia-Pacific will help diversify revenue and reduce reliance on German/European cycles, driving long-term top-line growth and mitigating regional market risks.

Hensoldt Earnings and Revenue Growth

Hensoldt Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Hensoldt's revenue will grow by 17.7% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 3.9% today to 9.3% in 3 years time.
  • Analysts expect earnings to reach €352.8 million (and earnings per share of €3.05) by about August 2028, up from €90.0 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 42.9x on those 2028 earnings, down from 116.3x today. This future PE is lower than the current PE for the DE Aerospace & Defense industry at 109.2x.
  • Analysts expect the number of shares outstanding to grow by 5.4% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 5.76%, as per the Simply Wall St company report.

Hensoldt Future Earnings Per Share Growth

Hensoldt Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Hensoldt's heavy dependence on the German defense budget and political approval cycles-highlighted throughout the call-creates structural revenue risk, as delayed or fluctuating government procurement in Germany (or Europe more broadly) could lead to revenue volatility and long-term stagnation if political priorities change. (Negative impact: revenue, earnings visibility)
  • Uncertainty regarding international expansion, with several references to Europe's fragmented defense funding landscape and later-stage maturity, means Hensoldt's mid
  • and long-term export growth is not yet assured, potentially limiting its geographic diversification and increasing reliance on core European markets. (Negative impact: revenue diversification, long-term top-line growth)
  • The company's significant industrial transformation investments (logistics center, Oberkochen site, Operations 2.0) entail execution risks and upfront costs; if order flows or funding support are delayed, or if operational disruptions last longer than anticipated, net margins and short
  • to mid-term earnings may be compressed. (Negative impact: net margins, earnings)
  • Profitability in the Optronics and especially South African businesses remains uncertain, with management explicitly hesitant to forecast a return to meaningful profitability or double-digit EBITDA for the South African entity; this segment may continue to act as a drag on group margins and earnings. (Negative impact: margins, group earnings)
  • While ESG (acquisition) and the shift to software-defined defense are seen as strategic positives, actual realization of cost and revenue synergies is only progressing in line with internal expectations so far, not above; further, ongoing R&D and integration costs in pioneering new capabilities carry the risk of future margin dilution if market adoption does not match internal forecasts. (Negative impact: margin expansion, return on investment, future earnings growth)

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of €94.818 for Hensoldt 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 €120.0, and the most bearish reporting a price target of just €55.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.8 billion, earnings will come to €352.8 million, and it would be trading on a PE ratio of 42.9x, assuming you use a discount rate of 5.8%.
  • Given the current share price of €90.6, the analyst price target of €94.82 is 4.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  • 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.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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