Chemring (BC88) AI Stock Analysis

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Chemring

(LSE:BC88)

Rating:63Neutral

Price Target:

103.00p

▲(6.19% Upside)

Chemring shows strong financial performance with robust revenue growth and profitability, but technical indicators suggest the stock may be overbought. Valuation is neutral due to lack of data, while positive earnings call data is excluded from calculation due to weight distribution.

Chemring (BC88) vs. iShares MSCI United Kingdom ETF (EWC)

Market Cap

£1.45B

Dividend Yield7.22%

Average Volume (3M)1.76K

Price to Earnings (P/E)―

Beta (1Y)-9.54

Revenue GrowthN/A

EPS GrowthN/A

CountryUK

Employees2,786

SectorIndustrials

Sector Strength73

IndustryAerospace & Defense

Share Statistics

EPS (TTM)N/A

Shares Outstanding62,500

10 Day Avg. Volume1,762

30 Day Avg. Volume1,762

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

£103.00

Price Target Upside6.19% Upside

Rating ConsensusHold

Number of Analyst Covering0

Chemring Business Overview & Revenue Model

Company DescriptionChemring Group PLC is a UK-based defense technology company that specializes in advanced manufacturing and engineering for defense and security markets. The company operates across several sectors, including munitions, countermeasures, explosive ordnance disposal, and sensing solutions. Chemring's core products and services include pyrotechnics, military training systems, and innovative technologies for defense applications, catering to both military and civilian markets globally.

How the Company Makes MoneyChemring generates revenue primarily through the sale of defense-related products and services. The company operates multiple segments, including Countermeasures, Munitions, and Sensors, each contributing to its overall revenue. Key revenue streams include long-term contracts with government defense departments, sales of military equipment and systems, and the provision of technical support and training services. Significant partnerships with military organizations and defense contractors enhance its market presence, while ongoing investments in research and development allow Chemring to innovate and expand its product offerings, ensuring a steady flow of income from both new and existing customers.

Chemring Earnings Call Summary

Earnings Call Date:Jun 03, 2025

(Q2-2025)

% Change Since: |

Next Earnings Date:Dec 23, 2025

Earnings Call Sentiment Positive

The earnings call was largely positive, with significant achievements in order book growth, operational performance, and strategic initiatives. However, there were some challenges, particularly in the Sensors & Information segment and headcount reductions at Roke. Despite these setbacks, the company's strong financial position and strategic investments underpin a positive outlook.

Q2-2025 Updates

Positive Updates

Record Order Book

The company achieved a record order book of GBP 1.3 billion, up 25% from the previous year.

Significant Growth in Countermeasures & Energetics

Countermeasures & Energetics revenue grew by 20%, with operating profit up 73% and margins increasing to 14.4%.

Strong Cash Conversion and Dividend Increase

The company reported strong cash conversion at 80% and declared an interim dividend of 2.7p, up 4%.

Successful Refinancing and Available Liquidity

Refinanced RCF from GBP 150 million to GBP 180 million with facilities up to GBP 275 million available.

Launch of Next-Generation EW System Deceive

Roke launched a new electronic warfare system, Deceive, which has already attracted international interest from over 15 countries.

Negative Updates

Decline in Sensors & Information Segment

Revenue in the Sensors & Information segment was down 12%, and operating profit decreased by 26% due to delays in U.K. government spending.

Headcount Reductions in Roke

Roke experienced softness in U.K. order intake, leading to strategic headcount reductions, particularly in the Futures side of the business.

Company Guidance

During the call, Chemring outlined their robust financial performance and provided detailed guidance for the future. The company's order intake reached a record GBP 488 million, a 42% increase from the previous year, contributing to a historic order book of GBP 1.3 billion, up 25%. Revenue grew by 5%, with operating profit increasing by 8%, leading to a 3% rise in earnings per share. The company also reported strong cash conversion at 80% and declared an interim dividend of 2.7p, a 4% increase. Chemring's Countermeasures & Energetics segment showed significant growth, with revenue up 20% and operating profit up 73%, increasing the margin to 14.4%. Despite challenges in the Sensors & Information segment, the company's operational margin improved to 11.6%. Chemring maintained its long-term goal of achieving GBP 1 billion in revenue by 2030, supported by strategic investments and a focus on safety, excellence, and innovation. The company also emphasized its commitment to managing risks while pursuing organic and inorganic growth opportunities.

Chemring Financial Statement Overview

Summary

Chemring has demonstrated strong revenue growth and profitability with improved margins and cash generation capabilities. The company maintains a conservative financial structure with low leverage, but a decrease in free cash flow requires attention.

Income Statement

Very Positive

Chemring has demonstrated strong revenue growth, with a significant increase from the previous year, indicating a robust growth trajectory. The gross profit margin remains high at 100%, which is unusual and suggests all revenues translate directly into gross profit. The net profit margin has improved substantially from 1.14% to 7.74%, reflecting enhanced operational efficiency. Both EBIT and EBITDA margins have improved, indicating better core profitability and operational efficiency.

Balance Sheet

Positive

The company's balance sheet shows a healthy equity ratio of 51.49%, suggesting a strong reliance on equity financing. The debt-to-equity ratio stands at 0.27, indicating a conservative use of leverage. However, the return on equity has decreased, which may point to less efficient use of shareholder funds compared to previous periods.

Cash Flow

Positive

Chemring's operating cash flow has increased, showcasing improved cash-generating ability. However, free cash flow has decreased due to higher capital expenditures. The free cash flow to net income ratio has declined, suggesting that less net income is translating into free cash flow, which could impact future flexibility.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	510.40M	472.60M	442.80M	393.30M	402.50M
Gross Profit	510.40M	472.60M	442.80M	393.30M	402.50M
EBITDA	82.70M	67.70M	76.20M	75.50M	75.10M
Net Income	39.50M	5.40M	47.40M	41.50M	34.70M
Balance Sheet
Total Assets	692.10M	596.40M	620.10M	531.50M	541.40M
Cash, Cash Equivalents and Short-Term Investments	45.00M	6.40M	19.80M	5.80M	14.70M
Total Debt	97.70M	20.70M	26.90M	32.30M	62.80M
Total Liabilities	335.80M	217.90M	202.00M	178.70M	211.80M
Stockholders Equity	356.30M	378.50M	418.10M	352.80M	329.60M
Cash Flow
Free Cash Flow	11.40M	31.70M	46.00M	45.50M	35.10M
Operating Cash Flow	81.00M	65.90M	80.50M	75.70M	75.90M
Investing Cash Flow	-47.60M	-39.40M	-30.50M	-34.90M	-25.40M
Financing Cash Flow	-37.30M	-40.20M	-35.80M	-50.40M	-32.10M

Chemring Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SNR	77 Outperform	£806.92M	23.20	8.19%	0.91%	-13.81%	13.86%
AVON	65 Neutral	£569.70M	112.36	4.18%	0.97%	14.69%	―
CHRT	65 Neutral	£566.22M	27.56	14.40%	1.31%	33.33%	19.01%
Sector *	64 Neutral	$10.75B	15.69	7.62%	2.01%	2.75%	-15.14%
BC88	63 Neutral	£1.45B	―		7.22%	―	―
BAESF	―	$70.16B	28.40	17.59%	2.94%	―	―
QQ	56 Neutral	£2.56B	17.97	-23.92%	1.85%	1.02%	-240.44%

* Industrials Sector Average

Performance Comparison

GB:BC88

Chemring

97.00

0.00

0.00%

BAESF

BAE Systems

24.17

7.46

44.64%

GB:AVON

Avon Technologies

1,918.00

702.03

57.73%

GB:CHRT

Cohort plc

1,242.00

403.60

48.14%

GB:SNR

Senior plc

194.40

36.79

23.34%

GB:QQ

QinetiQ

478.00

36.24

8.20%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 04, 2025