This report is an updated version of the report published on 10 May 2023 at 08:15 AM GMT +1

Section 1.0. UK Aerospace & Defence Sector Landscape, Trends & SWOT Analysis

Section 1.1. Aerospace & Defence Sector Landscape

The UK Aerospace industry is the second largest globally and it is majorly an export-driven industry. As per the International Trade Association, 98% of the UK’s domestic aerospace production was exported in 2021. From defence industry, the UK generated around USD 33 billion of turnover, while USD 15 billion of which was exported in 2021. Britain has a mature supply chain and excellent reputation for producing aircraft systems, engines, wings, helicopters, among others. Despite the Covid-19 pandemic led economic turbulence, British government announced plans to enhance the capabilities of its armed forces. Kalkine’s Sector Report covers the Investment Summary, Sector Landscape, Trends & SWOT Analysis, Risks, Recent Business Updates along with the Valuation, Target Price, and Recommendation on the stock.

Section 1.2. Trends in the Aerospace & Defence Sector

Section 1.3. SWOT Analysis

Section 2.0. Sector Risks & Opportunities

Section 2.1. Risk Exposures to Aerospace & Defence Sector

Section 2.2. Aerospace & Defence Sector Outlook

The reduction in air passenger tax is expected to elevate the demand levels for domestic flights in the UK. The new cut in air passenger duty (APD) for domestic flights halving the price to £6.50 got effective from 01 April 2023. Moreover, it will boost routes that are not served by rail and help support regional economies. Meanwhile, British defence companies are planning to deepen economic, defence and security ties with India. Around 11 British defence companies have already established joint ventures or subsidiaries in India. However, industry needs to invest in sustainable solutions as it is one of the major contributors of carbon emission. Nevertheless, current government policies are supportive and considering defence spending in the domestic industry is a significant contributor to boosting the economy.

After gaining insights into Aerospace & Defence, we would look at the business model of two relevant players listed on the London Stock Exchange.

Section 3.0. International Consolidated Airlines Group SA (LSE: IAG) (‘Buy’ at GBX 155.80, closing price as of 09 May 2023)

3.1 Company Details

3.2. Key Metrics in Pictures

3.3 Valuation and Technical Guidance

Section 4.0: Cohort PLC (LSE: CHRT) (‘Speculative Buy’ at GBX 481.50, closing price as on 09 May 2023)

4.1 Company Details

4.2. Key Metrics in Pictures

4.3 Valuation and Technical Guidance

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 09 May 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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