H&K AG (MLHK.PA) | Investment Case

1. Company Snapshot

1.a. Company Description

H&K AG, together with its subsidiary, develops, manufactures, markets, and distributes infantry and sidearms for federal, state, or local governmental agencies in NATO countries and the European Union.It offers a range of small arms for military and law enforcement, and civil markets, such as pistols, submachine guns and pistols, assault rifles, precision rifles, machine guns, training systems, 40 MM systems, grenade launchers, and specialist equipment, as well as provides related accessories and services.The company was founded is 1949 and is based in Oberndorf am Neckar, Germany.

H&K AG is a subsidiary of Compagnie de Développement de l'Eau S.A.

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1.b. Last Insights on MLHK

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1.c. Company Highlights

Last Price	46
Change Percentage	0.44%
Open	46.8
Previous Close	45.8
Market Cap ( Millions)	1632
Volume	2138
Year High	172
Year Low	44
M A 50	46.66
M A 200	94.04

FCF Yield	2.30%
Dividend Yield	0.13%
ROE	19.27%
Debt / Equity	66.90%
Net Debt / EBIDTA	115.92%
Price To Book	11.38
Price Earnings Ratio	63.1
Price To FCF	43.56
Price To sales	4.64
EV / EBITDA	28.66

2. Transcript Summary

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3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.56%)

6. Segments

Germany

Expected Growth: 4.8%

Growing demand for military modernization, increasing terrorism threats, and rising defense budgets drive the growth of the firearms and ammunition market, benefiting Heckler & Koch AG.

USA - Commercial

Expected Growth: 4.5%

Growing demand for handguns and rifles among civilians, increasing adoption of smart firearms, and rising concerns about personal safety drive the growth of the commercial firearms and ammunition market in the USA.

France

Expected Growth: 4.5%

Growing demand for firearms and accessories in France, driven by increasing security concerns and a rise in recreational shooting activities, will fuel growth for H&K AG's subsidiary. The French government's investments in military modernization and law enforcement will also contribute to the segment's growth.

Great Britain

Expected Growth: 4.5%

Growing demand for law enforcement and military equipment, increasing defense budget, and rising concerns over national security drive the growth of the UK firearms market, with Heckler & Koch AG's UK-based operations poised to benefit from these trends.

USA - Defense

Expected Growth: 3.5%

The US defense segment of H&K AG is expected to grow driven by increasing demand for advanced firearms and ammunition, government investments in military modernization, and rising threats from terrorism and cyber attacks.

7. Detailed Products

Small Arms

Heckler & Koch is a leading manufacturer of small arms, including pistols, rifles, and machine guns, used by military, law enforcement, and civilian markets.

Machine Guns

H&K machine guns are designed for high-volume firepower, reliability, and durability, used in various military and law enforcement applications.

G36 Rifles

The G36 is a family of 5.56mm rifles designed for military and law enforcement use, offering high reliability, accuracy, and modularity.

MP7 Personal Defense Weapon

The MP7 is a compact, lightweight personal defense weapon designed for close quarters combat, offering high firepower and low recoil.

G28 and G29 Sniper Rifles

H&K sniper rifles are designed for long-range, high-precision engagements, used by military and law enforcement snipers.

Less Lethal Systems

H&K less lethal systems include pepper spray, tear gas, and other non-lethal munitions, designed for crowd control and riot situations.

8. H&K AG's Porter Forces

Forces Ranking

Threat Of Substitutes

H&K AG's products are highly specialized and customized, making it difficult for substitutes to emerge. However, the increasing trend of digitalization and automation in the manufacturing industry may lead to the development of substitutes in the future.

Bargaining Power Of Customers

H&K AG's customers are primarily large corporations and governments, which have limited bargaining power due to their dependence on H&K AG's specialized products and services.

Bargaining Power Of Suppliers

H&K AG relies on a diverse range of suppliers for its production, which reduces the bargaining power of individual suppliers. However, the concentration of suppliers in certain industries may lead to increased bargaining power.

Threat Of New Entrants

The high barriers to entry in the defense industry, including significant capital requirements and regulatory hurdles, make it difficult for new entrants to challenge H&K AG's market position.

Intensity Of Rivalry

The defense industry is highly competitive, with several established players competing for a limited number of contracts. H&K AG faces intense rivalry from companies such as Lockheed Martin, Raytheon, and BAE Systems.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	50.35%
Debt Cost	3.95%
Equity Weight	49.65%
Equity Cost	7.76%
WACC	5.84%
Leverage	101.42%

11. Quality Control: H&K AG passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

MTU Aero Engines

A-Score: 4.9/10

Value: 2.2

Growth: 6.1

Quality: 5.5

Yield: 1.2

Momentum: 8.5

Volatility: 6.0

1-Year Total Return ->

Saab

A-Score: 4.4/10

Value: 0.6

Growth: 7.9

Quality: 5.6

Yield: 1.2

Momentum: 10.0

Volatility: 1.3

1-Year Total Return ->

Leonardo

A-Score: 4.4/10

Value: 1.7

Growth: 6.8

Quality: 4.0

Yield: 1.2

Momentum: 10.0

Volatility: 2.7

1-Year Total Return ->

QinetiQ

A-Score: 4.2/10

Value: 5.0

Growth: 4.4

Quality: 2.4

Yield: 2.5

Momentum: 7.5

Volatility: 3.7

1-Year Total Return ->

Elbit Systems

A-Score: 4.0/10

Value: 1.1

Growth: 6.2

Quality: 5.1

Yield: 1.9

Momentum: 5.0

Volatility: 4.7

1-Year Total Return ->

Heckler & Koch

A-Score: 2.3/10

Value: 0.6

Growth: 7.3

Quality: 5.6

Yield: 0.0

Momentum: 0.0

Volatility: 0.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

2.99%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.84%

H&K AG - DE000A11Q133

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on MLHK

Have nothing to say about that one ...

1.c. Company Highlights

More Volatile

Expensive

Lower Yield

Strong Momentum

Weak Momentum

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.56%)

6. Segments

Germany

Expected Growth: 4.8%

USA - Commercial

Expected Growth: 4.5%

France

Expected Growth: 4.5%

Great Britain

Expected Growth: 4.5%

USA - Defense

Expected Growth: 3.5%

7. Detailed Products

Small Arms

Machine Guns

G36 Rifles

MP7 Personal Defense Weapon

G28 and G29 Sniper Rifles

Less Lethal Systems

8. H&K AG's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: H&K AG passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

46.0$

Current Price

46$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA