Chemring (CHG) wrapped up the sale of its low-margin ammunition business a few weeks ago, focusing the resurgent defence company on higher-margin sensors and electronics. It will use the £138m proceeds to pay down debt. Analysts at Investec Securities reckon earnings forecasts would "rise significantly" if management solved legacy operational issues.
IC TIP:
Buy
Investec hears that certain problems are taking longer than expected to resolve, but new management is still making progress. Earnings at the countermeasures division - where volumes have likely bottomed out - should improve when both the F-35 and Typhoon jets go fully operational.
