Analyst Note| Joachim Kotze |
Some more positive news from wide-moat Safran as the group further raises guidance for 2021 free cash flow and Leap engine deliveries. Free cash flow is now expected to exceed EUR 1.5 billion, where it was previously expected to be an increase on the EUR 1 billion generated in 2020, and Leap engine deliveries to reach 900 for the full year, up from previous guidance of 800 units. Guidance for a full-year revenue decline in the low single digits and a 1% increase in the EBIT margin to 11% remains unchanged. Third-quarter organic group revenue growth of 11.6% was driven by an increase in group services growth of 27%, in line with the recovery of global flight activity. We remain positive on the group’s long-term fundamentals driven by a young fleet (lower retirement risk) and favorable narrow-body aircraft exposure. We maintain our EUR 142 fair value estimate, which implies decent upside for a high-quality business.