Last Update 05 Dec 25

Fair value Decreased 5.41%

HAG: European Defense Spending Will Drive Future Upside Despite Near Term Execution Risks

The analyst price target for Hensoldt has been trimmed to approximately EUR 93 from about EUR 99, as analysts factor in slower near term revenue growth, softer margin expectations and a modestly higher discount rate, while also highlighting valuation support and long term growth visibility reflected in recent Buy initiations and upgrades around the EUR 100 to EUR 114 range.

Analyst Commentary

Recent Street research on Hensoldt reflects a more nuanced stance, with targets converging around the low EUR 100s and opinions split between near term execution risk and long term growth and valuation support.

Bullish Takeaways

Bullish analysts view the recent 20 percent share price pullback as having created an attractive entry point, with several Buy or Overweight stances supported by price targets around EUR 100 to EUR 114.
Initiations with positive ratings highlight Hensoldt as a structural beneficiary of sustained European defense spending, underpinned by solid long term growth visibility into and beyond 2030.
Some target cuts are framed as recalibrations rather than downgrades, with bullish analysts maintaining positive recommendations while trimming estimates to reflect more realistic growth and margin ramps.
Medium to long term commentary around 2030 plus is viewed as reassuring, with updated forecasts still implying meaningful potential from current levels if execution improves as expected.

Bearish Takeaways

Bearish analysts flag that sales growth and EBITDA margin improvement are now expected to be more back end loaded, raising concerns about near term execution risk and the timing of cash flow inflection.
Some research notes describe the latest Capital Markets Day targets as underwhelming, pointing to a slowdown in growth before any reacceleration into the 2027 to 2030 period.
Target reductions into the EUR 90 to EUR 101 range reflect more cautious assumptions on revenue conversion and profitability, with a view that previous expectations may have been too optimistic.
Neutral and Hold stances emphasize that, despite long term potential, the current valuation is seen as already discounting a sizeable portion of the outer year growth story, which would leave limited room for further gains if execution slips.

What's in the News

Hensoldt lowered its 2025 guidance and now expects revenue of approximately EUR 2,500 million, trimming the prior EUR 2,500 million to EUR 2,600 million range (company guidance)
Hensoldt AG (XTRA:HAG) was added to the FTSE All-World Index, increasing its visibility among global equity investors and index-tracking funds (index provider announcement)

Valuation Changes

Fair Value: reduced from approximately €98.7 to about €93.4, indicating a modest downward revision in intrinsic value estimates.
Discount Rate: risen slightly from around 5.69 percent to roughly 5.79 percent, reflecting a marginally higher perceived risk profile or cost of capital.
Revenue Growth: lowered from about 18.8 percent to approximately 16.9 percent, signaling a moderate tempering of medium term top line expectations.
Net Profit Margin: trimmed from roughly 9.1 percent to about 8.2 percent, pointing to slightly softer profitability assumptions.
Future P/E: increased from around 32.3x to approximately 36.7x, suggesting a higher valuation multiple relative to updated earnings forecasts.

Overvaluation risk stems from reliance on elevated defense budget projections across Europe, which may not fully materialize.
Planned R&D and operational expansions could compress margins and impact profitability if demand and revenue growth fall short.
Strong demand and strategic initiatives support revenue growth and profitability, with a focus on defense, digitalization, and operational expansion enhancing long-term earnings potential.

Catalysts

About Hensoldt

HENSOLDT AG, together with its subsidiaries, provides defense and security electronic sensor solutions worldwide.What are the underlying business or industry changes driving this perspective?

The company reports robust order intake growth driven by increased defense spending, particularly in air defense, across Europe. However, future revenue expectations are based on elevated budget levels, which may not fully materialize, leading to potential overvaluation risk tied to revenue projections.
Hensoldt plans a major scale-up in operations, including a move to new facilities and increased production capacity, which may entail execution risks. If these expansions do not align with actual demand, profitability and operational efficiency could be adversely impacted.
With an increased focus on digitalization and software-defined defense capabilities, there is significant planned investment in R&D. While this could improve long-term prospects, it may compress margins in the short term if revenue growth expectations do not meet forecasts.
The integration and performance stabilization of acquired entities such as ESG could dilute overall margins, affecting near-term earnings. If cost synergies are not realized as expected, this could weigh on financial performance.
The geopolitical landscape, including potential defense budget shifts amid evolving transatlantic relations, could impact expected growth. If European defense budgets do not increase as anticipated due to political changes or U.S.-Europe relations, this could lead to earnings variances from current market expectations.

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 €353.8 million (and earnings per share of €3.06) by about September 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 45.3x on those 2028 earnings, down from 118.3x today. This future PE is lower than the current PE for the DE Aerospace & Defense industry at 106.7x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 5.73%, as per the Simply Wall St company report.

Hensoldt Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Strong order intake and book-to-bill ratio of 1.3x indicates robust demand and revenue growth, driven by increased defense capabilities spending in Germany and Europe, suggesting potential for rising revenues.
The company's EBITDA margin remains strong at 19.4% before pass-through, and Hensoldt has demonstrated operational excellence in scaling production, which could maintain or improve profit margins.
Hensoldt's strategic initiatives, including the integration of ESG and a focus on multi-domain solutions, support potential long-term revenue growth across diversified divisions.
The company's focus on pioneering software-defined defense and digitalization positions it well to capitalize on new markets, enhancing earnings potential.
Locational and operational expansions, such as the new logistics center and increased production in Optronics, further support the prospect of sustained net margin improvements.

Valuation

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

The analysts have a consensus price target of €96.182 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 €70.0.
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 €353.8 million, and it would be trading on a PE ratio of 45.3x, assuming you use a discount rate of 5.7%.
Given the current share price of €92.15, the analyst price target of €96.18 is 4.2% 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.

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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.

Analyst Sentiment Lifts Hensoldt Price Target as Valuation and Growth Expectations Rise