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Chemring to benefit from US defence receipts

The rapidity of Chemring's order build will be the focus of analyst attention on the publication of the group's full-year figures
January 12, 2017

Our March buy call on Chemring (CHG) is now 30 per cent to the good (132p, 17 Mar 2016), but there's reason to think that the outlook for its three divisions are more favourable than they were on publication of the group's half-year report.

IC TIP: Buy at 171p

There's evidence to suggest that defence spending in its key overseas markets is set to increase on the back of US political pressure and the fraught security situation on Europe's doorstep. We expect a steep rise in underlying profitability at its sensors and electronics segment, buoyed by increased demand for electronic warfare protection and hand-held detection equipment. The prolonged oil price slump has weighed on group performance, but the commodity's recent stabilisation should eventually feed through into improving receipts from the energy sector.

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