Chemring (BC88) AI Stock Analysis

• Market Cap: £1.40B
• Dividend Yield: 7.22%
• Average Volume (3M): 1.76K
• Price to Earnings (P/E): ―
• Beta (1Y): N/A
• Revenue Growth: N/A
• EPS Growth: N/A
• Country: US
• Employees: 2,786
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): N/A
• Shares Outstanding: 62,500
• 10 Day Avg. Volume: 1,762
• 30 Day Avg. Volume: 1,762
• PEG Ratio: 0.01
• Price to Book (P/B): 0.74
• Price to Sales (P/S): 0.52
• P/FCF Ratio: 23.22
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: £600.00
• Price Target Upside: 518.56% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 68 Neutral
• Price Target: 106.00p ▲(9.28% Upside)

Chemring's strong financial performance and positive earnings call are the primary drivers of the score. However, technical analysis indicates overbought conditions, and the lack of P/E ratio data limits valuation insights.

Positive Factors

Record Order Book

A record order book indicates strong demand for Chemring's products, providing revenue visibility and stability. This supports long-term growth and strategic planning, reinforcing the company's market position in the defense sector.

Strong Cash Conversion

High cash conversion rates enhance financial flexibility, enabling Chemring to reinvest in growth opportunities and maintain shareholder returns. This reflects efficient operations and a robust financial foundation for future expansion.

Launch of Next-Generation EW System

The launch of the Deceive system represents a strategic innovation, expanding Chemring's product offerings and market reach. International interest suggests potential for significant new revenue streams, enhancing competitive advantage.

Negative Factors

Decline in Sensors & Information Segment

A decline in this segment highlights vulnerabilities to government spending cycles, impacting revenue and profit. This could challenge Chemring's diversification efforts and necessitate strategic adjustments to mitigate dependency risks.

Decreased Free Cash Flow

Reduced free cash flow limits Chemring's ability to fund new projects or return capital to shareholders without increasing debt. This could constrain growth if capital expenditures do not yield expected returns.

Headcount Reductions in Roke

Headcount reductions suggest operational challenges and may impact morale and innovation. This could hinder Roke's ability to capitalize on future opportunities, affecting Chemring's overall growth potential.

Chemring Business Overview & Revenue Model

Company Description

Chemring Group PLC is a defense technology company. The company's operating segment includes Sensors and Information; it is engaged in the development and manufacturing of electronic countermeasures, chemical and biological threat detection equipment, and explosive hazard detection (EHD) equipment. and Countermeasures and Energetics segment is engaged in the development and manufacturing of expendable countermeasures for air and sea platforms, cartridge/propellant actuated devices, pyrotechnic devices for satellite launch and deployment, missile components, propellants, separation sub-systems, actuators, and energetic materials. It generates maximum revenue from the Countermeasures and Energetics segment. Geographically, the majority of the revenue for the company is generated from UK.

How the Company Makes Money

Chemring 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 Financial Statement Overview

Summary

Chemring demonstrates strong revenue growth and profitability with high margins and improved cash generation. The balance sheet is robust with low leverage, though the decrease in free cash flow warrants attention.

Income Statement

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

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

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	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	521.30M	510.40M	472.60M	442.80M	393.30M	402.50M
Gross Profit	507.90M	510.40M	472.60M	442.80M	393.30M	402.50M
EBITDA	96.60M	82.70M	67.70M	76.20M	75.50M	75.10M
Net Income	43.50M	39.50M	5.40M	47.40M	41.50M	34.70M
Balance Sheet
Total Assets	755.10M	692.10M	596.40M	620.10M	531.50M	541.40M
Cash, Cash Equivalents and Short-Term Investments	22.60M	45.00M	6.40M	19.80M	5.80M	14.70M
Total Debt	115.80M	97.70M	20.70M	26.90M	32.30M	62.80M
Total Liabilities	402.60M	335.80M	217.90M	202.00M	178.70M	211.80M
Stockholders Equity	352.50M	356.30M	378.50M	418.10M	352.80M	329.60M
Cash Flow
Free Cash Flow	6.00M	11.40M	31.70M	46.00M	45.50M	35.10M
Operating Cash Flow	81.10M	81.00M	65.90M	80.50M	75.70M	75.90M
Investing Cash Flow	-45.70M	-47.60M	-39.40M	-30.50M	-34.90M	-25.40M
Financing Cash Flow	-6.50M	-37.30M	-40.20M	-35.80M	-50.40M	-32.10M

Chemring Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHRT	69 Neutral	£565.79M	30.11	13.24%	1.58%	23.91%	-14.66%
BC88	68 Neutral	£1.40B	―	―	7.22%	―	―
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
BA	61 Neutral	£58.21B	30.33	17.59%	1.99%	11.60%	8.03%
QQ	58 Neutral	£2.74B	-13.26	―	2.00%	-4.59%	-256.51%
VEL	53 Neutral	£9.98M	-9.25	-13.02%	―	12.52%	75.23%
ALRT	49 Neutral	£36.89M	―	―	―	―	―