Thales Performing in Line With Expectations; FVE Maintained

Narrow-moat Thales’ first-quarter 2022 sales and order update is in line with expectations. Order intake for the first quarter is down 6% organically, driven by growth in aerospace and digital identity and security, or DIS, which was offset by lower defense orders due to large orders booked in the comparative period last year. Group sales increased by 2.7% organically, driven by strong DIS performance and ongoing momentum in space sales. Midpoint sales growth for 2022 of 4% was maintained while margins are still expected to be in the 10.8% to 11.1% range for the full year. Over the medium term, sales and profitability will be driven by the recovery in the aeronautics business and increased defense spending, which we have recently factored into our forecasts. Shares are currently trading at a slight discount to our EUR 130 fair value estimate and are nearing fair value.