CSG Czechoslovak Group (1K) | Buy | A good Q1 bodes well for the year

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CSG Czechoslovak Group (1K) | Buy | A good Q1 bodes well for the year

CSG Czechoslovak Group Buy | Target Price: EUR32.00

Reviewing the Q1 performance delivers reassuring insights

Overall, Q1 bodes well for reaching the reconfirmed FY2026 targets, in our view

CSG delivered a strong start to FY2026, underpinned by robust demand across global defence

markets, accelerating ammunition production, and major contract wins in both Europe and

Southeast Asia.

The group’s Q1 revenues grew YOY by 13.8% to EUR1.54bn. The strongest contribution came from

the Defence Systems segment, where revenue rose 26.5% year on year to EUR1.25 billion. Here,

growth was primarily driven by medium- and large-calibre ammunition as well as Land Systems,

reflecting continued military procurement activity among NATO countries and allied nations.

While Defence Systems performed strongly, the Ammo+ segment faced a more challenging

environment due to weak demand in the US commercial ammunition market during most of the

quarter. Revenue in the segment declined 20.5% year on year to EUR291m.

CSG’s operating EBIT in Q1 increased 8.7% YOY to EUR372 million, corresponding to a margin of

24.1% (off by 110bps YOY). While we understand that costs connected to the expansion of

capacities and the increase in the upstream level of vertical integration have weighed on

financials, both margins and FCF, it seems like positive operating gearing effects helped to

compensate for large parts of the margin headwind related to the aforementioned measures and

allowed the group’s operating EBIT to even rise YOY. The Defence Systems division achieved an

operating EBIT margin of approximately 28.4%, supported by improving product mix,

automation, and greater vertical integration across the production network.