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1. Company Snapshot

1.a. Company Description

Safran SA, together with its subsidiaries, engages in the aerospace and defense businesses worldwide.The company operates through three segments: Aerospace Propulsion; Aircraft Equipment, Defense and Aerosystems; and Aircraft Interiors.The Aerospace Propulsion segment designs, develops, produces, and markets propulsion and mechanical power transmission systems for commercial aircraft, military transport, training and combat aircraft, civil and military helicopters, and drones.


This segment also offers maintenance, repair, and overhaul services, as well as sells spare parts.The Aircraft Equipment, Defense and Aerosystems segment provides landing gears and brakes; and engine systems and equipment, such as thrust reversers and nacelles.This segment also offers avionics, such as flight controls and onboard information systems; security systems, including evacuation slides, emergency arresting systems, and oxygen masks; onboard computers and fuel systems; electrical power management systems and associated engineering services; and optronic equipment and sights, navigation equipment and sensors, infantry, and drones, as well as sells spare parts.


Its products and services are used in civil and military aircraft, and helicopters.The Aircraft Interiors segment designs, develops, manufactures, and markets aircraft seats for passengers and crew; cabin equipment, overhead bins, class dividers, passenger service units, cabin interior solutions, chilling systems, galleys, electrical inserts, and trolleys and cargo equipment; and water distribution equipment, lavatories, air systems, and in-flight entertainment and connectivity systems.Safran SA was incorporated in 1924 and is headquartered in Paris, France.

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1.b. Last Insights on SAF

Safran SA's recent performance was driven by strong demand for its services, particularly in the aftermarket segment, where engine makers generate most of their income. The company raised its recurring operating income guidance to around 4.1 billion euros ($4.44 billion) for 2024, citing a strong aftermarket performance. Additionally, Safran invested over 1 billion euros ($1.1 billion) to expand its engine repair capacity, hiring 4,000 people worldwide to meet the growing demand for LEAP jet engines. This move is expected to boost Safran's share of the aftermarket and drive revenue growth.

1.c. Company Highlights

2. Safran Soars to Record Heights with Double-Digit Growth

Safran's CEO, Olivier Andries, and Group CFO, Pascal Bantegnie, presented the company's Half Year 2025 Results, showcasing a record performance with double-digit growth across all key metrics. Revenue reached €14.8 billion, up 13% on an organic basis, and recurring operating income stood at €2.5 billion, representing a 17% margin. Earnings per share (EPS) came out at €3.89, relative to estimates at €3.9, a near miss. The company's financial performance was driven by strong demand in the civil aftermarket, with spare parts revenues up 21.6% in dollars.

Publication Date: Aug -03

📋 Highlights
  • Record Revenue Growth: Revenue reached €14.8 billion, up 13% organically, with recurring operating income of €2.5 billion (17% margin).
  • Civil Aftermarket Strength: Spare parts revenues rose 21.6% in dollars, driven by strong demand across all engine families.
  • Acquisition Milestone: Completed Collins actuation and flight control activities acquisition, enhancing flight control capabilities.
  • Record Free Cash Flow: Generated €1.8 billion in free cash flow, up 25% year-over-year.
  • Propulsion Margin Expansion: Propulsion margin expected to expand by 250 basis points, with LEAP-1A profit recognition starting in H1.

Revenue and Profitability

The propulsion division reported revenue of €7.5 billion, up 17% year-over-year, driven by civil aftermarket with spare parts revenues up 21.6%. The Equipment & Defense division reported revenue of €5.6 billion, up 8% organically, driven by guidance systems and resilient PNT solutions. The company's propulsion margin is expected to expand by 250 basis points this year, instead of 100 to 200 basis points, as stated by the CFO, Pascal Bantegnie, during the earnings call.

Growth Prospects and Guidance

Safran raised its full-year guidance, expecting revenue growth in the low teens, exceeding €30 billion, and recurring operating income guidance improved by €200 million at midpoint. The company expects spare parts and services revenues to be up in the mid- to high teens. The guidance excludes the contribution of Collins and any potential impact from tariffs. Analysts estimate next year's revenue growth at 12.1%, indicating a strong growth trajectory.

Valuation and Financial Health

At current prices, Safran trades at a P/E Ratio of -175.17, a P/B Ratio of 11.48, and a P/S Ratio of 4.2. The EV/EBITDA multiple stands at 47.77, while the Dividend Yield is 1.03%, and the Free Cash Flow Yield is 3.16%. The company's ROIC is 12.66%, and the Net Debt / EBITDA ratio is -0.6, indicating a healthy financial position.

Segmental Performance and Outlook

The civil aftermarket activity is much stronger than expected and should last longer. The company expects to double its defense electronics revenue by 2030, with a compounded annual growth rate of 20%. The growth is not back-loaded, with a strong dynamic in Europe. The full-year guidance for civil services implies a step-down in growth in the second half, but the company expects higher revenues in spare parts and services in H2 compared to H1.

3. NewsRoom

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Toast upgraded, PayPal downgraded: Wall Street's top analyst calls

Dec -04

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Looking at the Narrative for Safran After Upgraded Targets and Emerging Macro Risks

Dec -03

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Safran, the UK’s Third-largest Civil Aerospace Player, Expands Its Local Innovation Capabilities

Dec -03

Source:

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Is It Too Late To Consider Safran After Its 158% Three Year Surge?

Dec -03

Source:

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Britain to lead fightback against Chinese rare earths stranglehold

Dec -03

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Buy These 5 Low-Leverage Stocks as Market Moves Up

Nov -26

Source: zacks.com

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Woodward's Q4 Earnings Surge 48% Y/Y, Revenues Beat, Shares Rise

Nov -25

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Trump Says Saudi Arabia Can Buy F-35 Fighter Jets. Lockheed Martin Stock Gets a Boost.

Nov -17

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.32%)

6. Segments

Aerospace Propulsion

Expected Growth: 7.3%

Safran SA's Aerospace Propulsion systems benefit from increasing demand for fuel-efficient engines, growth in commercial air travel, and rising defense spending, driving segment growth.

Aeronautical Equipment, Defense and Aerosystems

Expected Growth: 4.5%

Safran SA's aeronautical equipment and defense systems are expected to grow driven by increasing demand for aircraft modernization, rising global security concerns, and growing adoption of digital technologies in the aerospace industry.

Aircraft Interiors

Expected Growth: 8.5%

Safran SA's aircraft interior systems and components segment will benefit from growing demand for air travel, increasing focus on passenger experience and comfort, and rising adoption of advanced materials and technologies.

Unallocated Currency Hedges

Expected Growth: 4.5%

Safran SA's unallocated currency hedges management benefits from increasing global trade, rising demand for risk management, and growing adoption of derivatives.

Holding Company and Other

Expected Growth: 5.5%

Safran SA, a leading aerospace and defense company, is expected to grow driven by increasing demand for aircraft and defense systems, expansion in emerging markets, and research and development investments in digital technologies and sustainable energy solutions.

7. Detailed Products

Aircraft Engines

Safran designs and manufactures aircraft engines for commercial and military aircraft, including the CFM56 and LEAP engines.

Helicopter Engines

Safran develops and produces helicopter engines, including the Arriel and Makila engines.

Rocket Engines

Safran designs and manufactures rocket engines for launch vehicles, including the Ariane 5 and Vega rockets.

Avionics

Safran develops and produces avionics systems, including flight control computers, navigation systems, and cockpit displays.

Aerostructures

Safran designs and manufactures aircraft structural components, including wings, fuselages, and engine nacelles.

Defense Electronics

Safran develops and produces defense electronics, including optronics, navigation systems, and communication systems.

Biometric Identification

Safran develops and produces biometric identification solutions, including fingerprint, facial, and iris recognition systems.

Cybersecurity

Safran develops and produces cybersecurity solutions, including threat detection, incident response, and security consulting services.

8. Safran SA's Porter Forces

Forces Ranking

Threat Of Substitutes

Safran SA operates in the aerospace and defense industry, where the threat of substitutes is moderate. While there are some substitutes available, they are not easily accessible, and the company's products are highly specialized.

Bargaining Power Of Customers

Safran SA's customers are primarily governments and large corporations, which have limited bargaining power due to the specialized nature of the company's products.

Bargaining Power Of Suppliers

Safran SA relies on a diverse range of suppliers, which reduces the bargaining power of individual suppliers. However, some suppliers may have significant bargaining power due to their specialized products.

Threat Of New Entrants

The aerospace and defense industry has high barriers to entry, including significant capital requirements and regulatory hurdles, which limits the threat of new entrants.

Intensity Of Rivalry

The aerospace and defense industry is highly competitive, with several established players competing for market share. Safran SA faces intense rivalry from companies such as Rolls-Royce, General Electric, and Pratt & Whitney.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 39.53%
Debt Cost 3.95%
Equity Weight 60.47%
Equity Cost 10.57%
WACC 7.95%
Leverage 65.36%

11. Quality Control: Safran SA passed 6 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

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BAE Systems

A-Score: 5.7/10

Value: 2.4

Growth: 6.9

Quality: 4.8

Yield: 4.4

Momentum: 9.5

Volatility: 6.3

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Safran

A-Score: 5.0/10

Value: 1.1

Growth: 4.1

Quality: 7.2

Yield: 0.6

Momentum: 8.5

Volatility: 8.3

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Airbus

A-Score: 5.0/10

Value: 1.7

Growth: 5.6

Quality: 5.2

Yield: 1.2

Momentum: 8.5

Volatility: 7.7

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Thales

A-Score: 4.9/10

Value: 2.0

Growth: 5.0

Quality: 4.2

Yield: 3.1

Momentum: 10.0

Volatility: 5.3

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Rheinmetall

A-Score: 4.9/10

Value: 0.2

Growth: 8.6

Quality: 6.3

Yield: 2.5

Momentum: 10.0

Volatility: 2.0

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Rolls-Royce

A-Score: 4.8/10

Value: 1.9

Growth: 6.4

Quality: 6.6

Yield: 0.6

Momentum: 9.5

Volatility: 3.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

292.9$

Current Price

292.9$

Potential

-0.00%

Expected Cash-Flows