Analyst David Farrell of Jefferies maintained a Buy rating on Chemring (CHG – Research Report), boosting the price target to p500.00.
David Farrell has given his Buy rating due to a combination of factors that highlight Chemring’s strategic positioning and future revenue potential. The recent announcement that Roke, a division of Chemring, will serve as the Prime Contractor for the STORM framework with the UK Ministry of Defence is a significant development. This contract, valued at £251 million over six years, not only provides substantial revenue visibility but also marks a notable increase from Roke’s previous contracts, helping to de-risk its revenue targets for the future.
Moreover, the immediate commencement of this contract addresses concerns about revenue shortfalls in Chemring’s Sensors & Information division, which had been a point of market apprehension. Additionally, the awarding of this contract amidst the ongoing UK Strategic Defence Review underscores the confidence in Chemring’s capabilities and the continued issuance of defense contracts. These factors collectively contribute to the positive outlook and the Buy rating for Chemring’s stock.