European Space Budget Upswing And Access To Space Expansion Will Drive Long-Term Upside

Catalysts

About OHB

OHB develops and delivers satellites, launch vehicle components and digital space infrastructure for institutional and commercial customers.

What are the underlying business or industry changes driving this perspective?

• Ramp up of Ariane 6 and broader launch vehicle component demand, supported by OHB's now fully owned MT Aerospace and growing Access to Space portfolio, should translate into higher recurring hardware volumes and improved operating leverage. This in turn supports revenue growth and EBIT margin expansion.
• Surging European and German space budgets for defense and security applications, including programs like ODIN'S EYE and broader military earth observation, position OHB as a key contractor. The company's large, already visible order pipeline can convert into multi year awards, underpinning backlog growth and earnings visibility.
• Expansion of manufacturing capacity in Sweden and Saxony, including the new OHB Sweden facility and the TechniSat Vogtland acquisition, enables serial satellite production and more sovereign supply chains in Germany. This should structurally lower unit costs and support margin improvement as volumes scale.
• Creation of the European Spaceport Company and continued ground infrastructure activities give OHB a role across the full launch value chain. This opens new fee based and service revenues tied to Europe’s drive for autonomous access to space and can diversify earnings and stabilize cash flows.
• Record order backlog of EUR 3.1 billion together with management guidance for strong revenue and EBITDA growth through 2026 indicates that current profitability is still absorbing upfront transformation and hiring costs. This leaves room for earnings and net margin expansion as efficiency programs and industrialization gains increasingly flow through the income statement.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming OHB's revenue will grow by 19.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.5% today to 7.0% in 3 years time.
• Analysts expect earnings to reach €135.1 million (and earnings per share of €7.03) by about December 2028, up from €6.1 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 23.6x on those 2028 earnings, down from 339.8x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 68.0x.
• 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 5.7%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long term upswing in European space and defense budgets, such as the EUR 80 billion plus of ministerial, German defense and EU level plans, could stall or be scaled back by political shifts or fiscal pressure. This would reduce the multi year order pipeline and slow revenue growth and backlog expansion.
• OHB is investing heavily in capacity expansion, new facilities in Sweden and Saxony and the European Spaceport Company, as well as hiring hundreds of technical staff. Any delay in program awards like EPS Sterna or ramp up issues on Ariane 6 could leave the group with underutilized assets and rising fixed costs, compressing EBIT margins and earnings.
• Industry consolidation in the European satellite and space sector, including projects like Bromo, may weaken OHB's long standing teaming and supply chain relationships with larger primes. This could potentially push the company into less favorable roles on flagship programs and limit pricing power, which would pressure future revenues and operating margins.
• Although current order backlog and guidance imply strong growth, OHB remains a project based business that depends on timely execution and risk management on complex missions. Cost overruns, technical setbacks or provisions on large contracts like interference projects could erode profitability and delay the path to the targeted 10 percent EBITDA margin and higher net income.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €141.0 for OHB based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €1.9 billion, earnings will come to €135.1 million, and it would be trading on a PE ratio of 23.6x, assuming you use a discount rate of 5.7%.
  
• Given the current share price of €109.0, the analyst price target of €141.0 is 22.7% 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.