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1. Company Snapshot

1.a. Company Description

Thales S.A. provides various solutions for civilian and military customers in the aeronautics, space, defense, security, ground transportation, and digital security markets worldwide.It operates through Aerospace, Transport, Defence & Security, and Digital Identity & Security segments.The company offers communications, command, and control systems; mission services and support; protection and mission/combat systems; surveillance, detection, and intelligence systems; training and simulation solutions for air, land, naval, and joint forces; and digital identity and security solutions.


It also provides air traffic management solutions; flight decks and avionics equipment and functions; in-flight entertainment and connectivity systems and services; electrical systems; aerospace training solutions; navigation solutions; support and services for avionics equipment; and vision systems.In addition, the company designs, operates, and delivers satellite-based systems for telecommunications, navigation, earth observation, environmental management, exploration, and science and orbital infrastructures; signaling, communications and supervision, and fare collection management systems and related services; cybersecurity and railway digitalization systems; and main line rail, and urban and intermodal mobility solutions.Further, it provides solutions for various markets and applications, including radiology, radio frequency, microwave sources, training and simulation solutions, lasers, and microelectronics solutions for science, industry, space, defense, automotive, railways, and energy conversion platforms.


Thales S.A. has a strategic agreement with Google LLC.The company was formerly known as Thomson-CSF and changed its name to Thales S.A. in 2000.Thales S.A. was founded in 1893 and is headquartered in Courbevoie, France.

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1.b. Last Insights on HO

Thales S.A.'s recent performance was negatively impacted by a decline in European defense stocks following diplomatic maneuvers during Ukraine's Volodymyr Zelensky's visit to Washington. The company's shares were also affected by a decrease in demand for its flight management systems and aircraft sequencing systems due to a slowdown in air travel and air traffic management. Additionally, the market's focus on digitalization and automation in the aerospace industry may have led to increased competition for Thales' products and services.

1.c. Company Highlights

2. Thales Delivers Strong H1 2025 Performance with Robust Sales and Profitability

Thales reported a solid financial performance in H1 2025, with high single-digit sales growth driven by strong momentum in Avionics and Defense. Total sales reached €10.3 billion, reflecting an 8.1% organic increase, supported by a book-to-bill ratio above 1. Adjusted EBIT rose to €1.2 billion, representing a 12.7% organic growth, with a margin of 12.2%. Adjusted net income reached €877 million, or €937 million excluding a temporary corporate tax payment in France. The company also secured significant contracts, including a €1.16 billion deal with the U.K. Ministry of Defense and an order for 26 Rafale fighter jets for the Indian Navy.

Publication Date: Jul -23

📋 Highlights
  • Strong Sales Growth: Achieved high single-digit sales growth in H1 2025, driven by Avionics and Defense, with total sales up 8.1% organically to €10.3 billion.
  • Robust Order Intake: Reported a book-to-bill ratio above 1, with order intake of €10.4 billion, reflecting strong commercial momentum.
  • Profitability Improvement: Adjusted EBIT reached €1.2 billion, a 12.7% organic growth, with a margin of 12.2%, and adjusted net income of €877 million.
  • Large Contract Wins: Secured significant contracts, including 26 Rafale fighter jets for the Indian Navy (€7.9 billion) and a GBP1.16 billion contract with the U.K. Ministry of Defense.
  • Free Cash Flow Performance: Generated strong free cash flow of €1.1 billion in H1, driven by working capital optimization, with a positive outlook for full-year cash flow generation.

Strategic Progress and Operational Highlights

Thales made notable progress on its strategic priorities, including capacity expansion, innovation, and integration of recent acquisitions. The company launched a €350 million investment plan for its Chalet site in France and continued to strengthen its employer brand. The integration of Imperva and Cobham has been successful, with synergies already materializing. For instance, the development of a 60 satellite communication system for the A400M aircraft underscores the benefits of these acquisitions. However, the Cyber segment faced inefficiencies due to the integration of Imperva's sales team, leading to a decline in Q2. Management expects a progressive recovery in H2, with positive growth anticipated by Q4.

Valuation and Outlook

Thales currently trades at a P/E ratio of 46.43, reflecting its premium valuation due to strong growth prospects and profitability. The P/S ratio of 2.34 indicates a rich valuation relative to its sales, while the EV/EBITDA of 21.6 highlights the market's confidence in its earnings potential. The company's free cash flow yield of 4.05% and ROE of 14.01% demonstrate its ability to generate cash and deliver returns to shareholders. Management reiterated its guidance for 2025, targeting organic sales growth of 6-7% and an adjusted EBIT margin of 12.2-12.4%. The company also expects a book-to-bill ratio above 1, underscoring its strong commercial pipeline.

Defense and Cyber Outlook

The Defense segment continues to be a growth driver, with double-digit sales growth in H1. Thales expects geopolitical tensions and increased defense spending, particularly in France, to further bolster its order intake. The Cyber segment, despite short-term challenges, is poised for recovery, with a focus on margin improvement and innovative solutions like file activity monitoring. The company's strategic investments and operational efficiencies position it well to achieve its 2025 targets and deliver long-term value creation.

3. NewsRoom

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European Enterprises Strive for AI Innovation and Compliance, ISG Says

Dec -02

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Google, Airbus and European defense stocks: Trending stocks

Dec -01

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Thales (ENXTPA:HO) Valuation in Focus After CEO Transition Signals Strategic Shift

Nov -26

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Dassault Aviation and cortAIx sign a strategic partnership for a sovereign AI serving the air combat of the future

Nov -25

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Will Thales (ENXTPA:HO) Leadership Change Shape Its Innovation and Sustainability Ambitions?

Nov -25

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European Defense Stocks Fall After U.S. Hails Ukraine Progress

Nov -24

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Ukraine peace, robotaxis and pharma: what's moving stocks

Nov -24

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European Defense Stocks Fall After U.S. Hails Ukraine Progress

Nov -24

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.10%)

6. Segments

Defence (Excluding of Digital I&S)

Expected Growth: 6.5%

The defence segment is likely to grow at a slightly lower rate than the global average due to budget constraints in some countries, but the overall demand for advanced military systems will drive growth. The 6.5% growth is a reasonable estimate considering the segment's stability and the ongoing modernization efforts.

Aerospace

Expected Growth: 8.0%

The aerospace segment is expected to grow faster than the global average due to the increasing demand for air travel and the need for advanced avionics systems. The growth in commercial aircraft deliveries and the modernization of military aircraft will drive this segment's growth.

Cyber & Digital

Expected Growth: 9.0%

The Cyber & Digital segment is expected to be one of the fastest-growing segments due to the increasing demand for cyber security and digital identity solutions. The ongoing digital transformation and the need for secure systems will drive this segment's growth.

Other

Expected Growth: 4.0%

The 'Other' segment is expected to grow at a lower rate due to its non-core nature and the potential for restructuring or divestment. The 4% growth is a conservative estimate, reflecting the segment's limited growth potential.

7. Detailed Products

Aerospace Solutions

Thales provides aerospace solutions for commercial and military aircraft, including avionics, navigation, and communication systems.

Transportation Systems

Thales offers transportation systems for rail, road, and sea, including signaling, train control, and passenger information systems.

Defence and Security Solutions

Thales provides defence and security solutions for governments and military forces, including communication, electronic warfare, and optronics systems.

Digital Identity and Security Solutions

Thales offers digital identity and security solutions for governments, enterprises, and individuals, including biometric authentication and cybersecurity systems.

Satellite Systems

Thales provides satellite systems for telecommunications, navigation, and Earth observation, including satellite design, manufacturing, and operation.

8. Thales S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Thales S.A. operates in a highly competitive industry, but its strong brand recognition and diversified product offerings mitigate the threat of substitutes.

Bargaining Power Of Customers

Thales S.A. has a diverse customer base, and no single customer has significant bargaining power, reducing the threat of customer bargaining power.

Bargaining Power Of Suppliers

Thales S.A. relies on a network of suppliers, but its large scale and diversified supply chain mitigate the bargaining power of individual suppliers.

Threat Of New Entrants

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

Intensity Of Rivalry

The aerospace and defense industry is highly competitive, with several established players competing for market share, driving the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 51.30%
Debt Cost 3.95%
Equity Weight 48.70%
Equity Cost 6.91%
WACC 5.39%
Leverage 105.32%

11. Quality Control: Thales S.A. 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

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Value: 2.4

Growth: 6.9

Quality: 4.8

Yield: 4.4

Momentum: 9.5

Volatility: 6.3

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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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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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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

224.2$

Current Price

224.2$

Potential

-0.00%

Expected Cash-Flows