Raising Our Target Price: Blue Canyon Opens Up the U.S. Government/Defense Market

Research evidence excerpt

Raising Our Target Price: Blue Canyon Opens Up the U.S. Government/Defense Market

Investment Thesis

We remain Outperform on MDA and raise our target price to C$68. MDA is both a space stock and a

defense stock, and its valuation multiple has benefited from that dynamic in recent months. Investors

have become increasingly aware of the strong secular tailwinds in both sectors and, we believe, of some

of MDA's distinguishing characteristics—including its long heritage of successful space missions and track

record of strong, consistent profitability.

While MDA is now better-known to investors than prior to its U.S. IPO, we believe the sheer breadth of its

opportunity set remains underappreciated. Each of MDA's three key divisions—Satellite Systems, Robotics

& Space Operations and Geointelligence—could arguably be a standalone public company in its own right.

Each has world-class capabilities; exposure to large and fast-growing end markets; and opportunities

spanning commercial, civil and defense, including with foreign governments. Each can participate as

either a prime contractor or as a supplier, and each has the Canadian government as a very supportive

anchor client (indirectly in Satellite Systems, through Canada's funding of Telesat, and more directly

through the upcoming ESCP-P program). The Blue Canyon acquisition will now significantly add to MDA's

pipeline and TAM by increasing its access to the U.S. government/defense market.

This is ultimately a contract-driven business, and a stock that will be influenced by news flow and the

ebbs/flows of the backlog. However, the breadth of MDA's pipeline give us confidence in its ability to

replenish and grow its order book over the coming months, and in the durability of its long-term growth.