Highlights

  • Berenberg and Investec Bank have both issued buy ratings on QinetiQ with target prices of GBP 550 and GBP 605, respectively.
  • QinetiQ’s interim results show stable profit margins, flat EPS, and cash conversion despite near-term revenue challenges.
  • The company announced a 7% increase in its interim dividend, maintaining its progressive dividend policy.

QinetiQ Group Plc (LSE:QQ), a prominent player in the defence sector, has received buy ratings from two notable UK-based financial institutions. Berenberg has assigned a buy rating to QinetiQ, setting a target price of GBP 550 per share. Similarly, Investec Bank (UK) Plc has also issued a buy rating, projecting a higher target price of GBP 605.

Interim Financial Results Align with Expectations

QinetiQ’s recently released interim results demonstrated financial performance broadly in line with market expectations. Despite a 3% decline in organic revenue attributed primarily to US restructuring and challenging near-term market conditions, the company managed to sustain an underlying operating profit margin of 10.7%, slightly ahead of guidance. The underlying earnings per share (EPS) remained flat at 14.2p, supported by the effects of an accelerated share buyback program. The company’s cash conversion rate was robust at 85%, and leverage stood at a conservative 0.6x.

Sustained Order Book and Market Position

QinetiQ reported a total order intake of GBP 2.4 billion, with a book-to-bill ratio of 0.9x, influenced by near-term UK market dynamics. The group secured a long-term partnership agreement extension valued at GBP 1.5 billion, aimed at transforming the UK’s Test & Evaluation capabilities for future warfare scenarios. With a significant backlog of GBP 4.8 billion—encompassing both funded and unfunded contracts—and a pipeline worth GBP 11 billion.

Dividend Growth Reflects Confidence

The company announced an interim dividend of 3.0p per share for the financial year ending March 31, 2026, marking a 7% increase from the previous half-year dividend of 2.8p. This follows QinetiQ’s policy of progressive dividend growth, reinforcing the firm’s commitment to returning value to shareholders. The interim dividend is scheduled to be paid on February 6, 2026, to shareholders on record as of January 9, 2026.

Guidance and Outlook for FY26

QinetiQ maintains its guidance for the full fiscal year 2026, anticipating approximately 3% organic revenue growth before currency fluctuations and the disposal of its Federal IT business. The company expects a margin around 11%, cash conversion near 90%, and EPS growth ranging between 15-20%. Additionally, QinetiQ forecasts revenue coverage of 89% for the second half of FY26, indicating a stable revenue stream amid ongoing market uncertainties.