Hensoldt (HAGG.DE): Estimate T126 cancellation hits ~1% of this year’s sales, ~0.2% of market cap – not material

Research evidence excerpt

Hensoldt (HAGG.DE): Estimate T126 cancellation hits ~1% of this year’s sales, ~0.2% of market cap – not material

Hensoldt (HAGG.DE)

30 June 2026 Citi Research

Hensoldt

Valuation

Our target price of €99 uses discounted cash flow valuation, with increasing European defense spending driving a 21% 5-year

profit CAGR (as Germany accelerates faster, and European companies gain share), 99% cash conversion, a 27% tax rate, and a

9% WACC. Our target price is equivalent to 2025E EV/EBIT 32x. We use a 8% medium-term (years 6–10) growth rate to model

continued defense growth in the outer years and a 3% terminal growth rate, in line with expected nominal GDP growth.

Risks

We believe the four main risks are: 1) Prime contractor risk on ECR mk1 and Pegasus programs—While both are for the German

armed forces, and Hensoldt is regarded as a German national champion, this is the first time that Hensoldt has been prime

contractor for such large programs; 2) Cash conversion—Having only existed as an independent company since early 2017,

Hensoldt does not have much history, and its ability to convert cash into profit is relatively unproven; 3) German defense

spending—Although increasing the defense budget appears to have cross-party support and spending priorities may have

changed post-COVID; 4) Resolution of the Russia-Ukraine conflict—This could result in a negative sentiment across the

defense sector, driving a derating, although we do not believe this would materially change the spending outlook.

If any of these risk factors has a greater downside impact than we anticipate, the share price will likely be lower than our target

price. Conversely, if the impact of any of these upside risks is greater than we anticipate, the stock could exceed our target price

(and the current share price).