Dassault Aviation (AO) | Buy | Taking stock

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Dassault Aviation (AO) | Buy | Taking stock

Dassault Aviation Buy | Target Price: EUR367.00

In France, a large portion of defence revenues comes from support services (Balzac, Ravel, etc.) and prepaid R&D revenues. We

estimate that the contribution of the FCAS paid for revenues was EUR 100-150m out of the estimated EUR 600m defence R&D

revenues total. Our estimates assume that margins on such prepaid R&D revenues are low to mid-teens. Support Services

accounts for the rest (including c. EUR 0.2bn a year for Ravel), which may have benefited in H1 from higher utilisation rates in the

Gulf in H1. One of the mechanical effects of the FCAS decision would be to erase an estimated EUR 100-150m of revenues at low

to mid-teens margin or 1.5-2% of EBIT and 1% of net profit from Dassault’s P&L by 27E onwards. That said, as other alternative

prepaid R&D projects or new contracts may be announced in the meantime, we are reluctant to amend our model prematurely.

Vortex, the group's reusable low-orbit space vehicle, is one such project that could attract interest at a time when space is in

vogue. The group has already gathered support from the DGA and ESA.

Defence Exports

On the export side, the group is ramping up its production to deliver on its strong 175 unit backlog, including 80 to the UAE, 26 to

the Indian Navy and 42 to Indonesia, amongst others.

The most important catalyst is the letter of request for 114 jets, including est. 94 were made in India, and 20 were made in France,

according to the press. Not many details have filtered while press leaks are not always reliable. Suppliers to the Make in India

tranches are being selected right now, while establishing a new assembly line in India may take a bit more time, the possibility of