Safran Earnings: In Line With 2023 Guidance

Wide-moat Safran SAF reported strong first-quarter revenue of EUR 5.2 billion, in line with management’s outlook for the year. All segments contributed to the group’s organic revenue growth at 25%—notably services in all divisions and civil aftermarket in particular, and a good increase in LEAP deliveries. The recovery observed in narrowbody air traffic available seat-kilometers brought traffic back to pre-COVID-19 levels, which supports our assumption for full-year 2023. The lifting of travel restrictions in China in mid-December 2022 played a significant role in the recovery, with CFM cycles also recovering to 2019 levels in North America, Europe, and China. However, the Asia-Pacific region, excluding China, is still at 80% of its 2019 level. Management remains vigilant on supply chain difficulties but reiterates its ability to offset inflation and meet its financial objectives for 2023. We maintain our fair value estimate of EUR 160.

The propulsion segment achieved robust organic growth of 35% year on year. This was mainly attributed to the surge in the civil aftermarket, which soared by 38% due to escalating demand for CFM56 spare parts. Additionally, the segment’s LEAP engine deliveries surged by 53%, in line with the full-year target. In the equipment and defense segment, service growth reached 25%, predominantly due to the compelling dynamics in nacelles, carbon brakes, and aerosystems. The segment’s original equipment remained stable, despite lower nacelle deliveries for the A320neo and A330neo. In the aircraft interiors segment, both services (seats and cabin) and OE experienced growth, with the latter witnessing a remarkable upsurge in cabin. The strong growth is primarily attributed to the increasing demand for cabin interior modifications and upgrades, as airlines invest in enhancing the passenger experience to attract travelers in the postpandemic period.