Flying the Flag: France Rearms – Daimler Truck, Airbus and HPQ Silicon Stand to Benefit

Paris Becomes a Risk – and a Customer

In early October, the yield on 10-year French government bonds briefly climbed to almost 5%. The last time the Grande Nation had to pay this much for fresh funding was in 2002. The yield spread over German Bunds reached its highest level since the euro crisis. Government debt stands at 119% of economic output, and parliament lacks a stable majority. A new president will be elected in spring 2027, but as things stand, this is unlikely to change the political deadlock. Instead, many investors fear the crisis will spread from Paris across Europe. One item remains off limits, however: the defence budget is set to rise to EUR 63.3 billion in 2027 and reach EUR 76.3 billion by the end of the decade. For suppliers to the armed forces, this is a reliable factor in uncertain times.

Daimler Truck: 7,000 Trucks for the Military

Daimler Truck secured the largest contract to date. In January, the French Ministry of Defence ordered 7,000 Zetros off-road military trucks. The PL6T designation refers to a logistics vehicle with a 6-tonne payload capacity. The programme will run for 10 years. The chassis will be built in Wörth am Rhein and Molsheim in Alsace. French partner Arquus will handle the military outfitting and maintenance. No prices were disclosed, but industry experts estimate the contract could be worth billions of euros.

For investors, predictability matters above all. The civilian truck business fluctuates sharply with the economic cycle. Defence contracts, by contrast, run for many years. In June, the group brought its activities together under the Daimler Truck Defence brand. The division's revenue is set to rise to EUR 1 billion by 2028, compared with a figure in the mid-hundreds of millions in 2025. One advantage is the close link to series production. “We draw on products that have already proven themselves,” explains division head Dennis Kinzelmann. This means there is little need for expensive specialist facilities.

In August, the group also raised its full-year guidance. Adjusted operating profit (EBIT) is now expected to reach EUR 3.6 to 4.1 billion, compared with the previous target of EUR 3.2 to 3.7 billion. The strong North American business was the decisive factor. Deutsche Bank puts the price target at EUR 54. At the current share price of around EUR 41, this implies upside potential of more than 30%. The expected dividend yield of more than 4.5% and the price-to-earnings (P/E) ratio of just over 10 for the current year also make the shares look attractive.

Airbus: Protection for Classified Data

Trucks move material. Today, the secure flow of information is at least as important. This is precisely where the latest contract for Airbus comes in. At the end of September, subsidiary Airbus Cybersecurity was awarded a 25-year contract by the French defence procurement agency DGA. Airbus develops, builds and maintains so-called security gateways. These gateways control data exchange between networks with different security classifications. They are used in data centres and command posts, as well as on board aircraft, helicopters and drones. Back in December 2025, Airbus was awarded a framework contract worth EUR 50 million to integrate artificial intelligence into the French army's systems.

For the aircraft manufacturer, these are relatively small sums—the signal they send matters more. The defence division was long regarded as a problem child because of costly setbacks with the A400M transport aircraft. But in the first half of 2026, its adjusted EBIT rose 84% to EUR 487 million, while order intake rose 83% to EUR 9.3 billion. Software and service contracts are also considered to offer higher margins than building military aircraft. “Our focus on consistent execution is paying off,” says chief executive Guillaume Faury. For the full year, Airbus is targeting around 870 deliveries and adjusted EBIT of around EUR 7.5 billion. The group will present its third-quarter figures on October 28.

Here too, analysts see considerable potential at the current share price of around EUR 193—the average target of around EUR 230 leaves just under 20% upside. In a research note dated October 9, RBC Capital Markets even cites EUR 250, also implying upside of just under 30%. Dividend yield estimates of 1.8% are significantly lower than for Daimler Truck, while the P/E ratio of just under 26 is considerably higher. In return, earnings are more predictable. Production is fully booked for the next 10 years. The waiting time for new orders for the popular A320neo family is up to eight years.

HPQ Silicon: Doubling Battery Life for Radios and Drones

Without radio communications, there is no command; without power, there are no radio communications. For soldiers on deployment, the battery determines how long they remain contactable. This is where a small-cap company comes into play, far less well known than major groups such as Airbus and Daimler Truck. Montreal-based HPQ Silicon holds a 36.8% stake in French battery specialist Novacium. By 2028, HPQ can increase its stake to just under half (49%) for roughly EUR 5 million. Under the contract, acquiring the remaining shares would then cost only EUR 1 million. This may sound odd, but HPQ provides a substantial part of the funding for Novacium's work, with licence fees alone amounting to EUR 90,000 a month. Investors buying HPQ shares are therefore also investing in Novacium's collaboration with the French armed forces. It also holds exclusive marketing rights for its technology in North America. The start-up from Solaize near Lyon replaces some of the conventional graphite in the anode, the negative terminal of a rechargeable battery, with silicon. The material stores significantly more energy, but expands considerably during charging. Overcoming this weakness through technical means is at the heart of the business model.

At the end of June, the French Army Technical Section (STAT) commissioned Novacium to develop new batteries for tactical radios. With the first delivery in the third quarter, the core objective has been achieved, at least on paper. The packs store 144 watt-hours instead of 72 and still fit existing connectors and chargers. Energy density increased by 63%. “If testing confirms the expected performance, the programme could provide a technical basis for offering the solution to other allied armed forces”, says HPQ CEO Bernard Tourillon. Feedback from the troops is expected in the coming weeks. A second series using the latest-generation cells is to follow. In addition, Novacium partner LN'Innov ordered battery packs for an army regiment, while manufacturer Alta Ares ordered them for drones.

Green Hydrogen From Aluminium Scrap

Another project with the French military is also underway: producing green hydrogen without electricity or an electrolyser. For this purpose, Novacium produces its own aluminium-silicon alloy as fuel, partly from aluminium scrap. The process, called METAGENE™, produces hydrogen directly under pressure, exactly where it is needed. Compressors, pressure tanks and supply chains are eliminated or at least reduced in size. A patent application has been filed for the technology; the defence procurement agency DGA has signalled interest and shortlisted the project for a funding programme. Usable heat is generated as a by-product, which HPQ CEO Tourillon says can also be used to heat buildings. Novacium is therefore not solely dependent on military contracts.

Meanwhile, a door is also opening into the civilian vehicle sector. In mid-October, HPQ and Novacium signed a testing agreement with Aptera Motors. The Nasdaq-listed US company is developing a particularly energy-efficient electric vehicle that generates some of its own electricity through solar cells in its bodywork. Only recently, the first model received its certificate of conformity from the US Environmental Protection Agency (EPA). In such a vehicle, every watt-hour that can be accommodated in little space and with little weight counts. Aptera is now initially testing the 21700-format cylindrical cells that HPQ markets under the ENDURA+™ brand in the laboratory. This marks the first time the cells are being evaluated for use in an electric vehicle. According to HPQ, they store around 25% more energy than conventional cells of the same size, and the gap is expected to widen with each new generation. “This is precisely the development we have been working towards with ENDURA+™”, Tourillon emphasises. However, the test does not entail a supply agreement. If the results are positive, further technical assessments and commercial discussions could follow.

A second business pillar is the joint venture HPQ Silica Polvere, which HPQ has operated with PyroGenesis since late September. The two partners each hold a 50% stake in the specialist, whose plasma reactor converts quartz into fumed silica in a single step. This material is an important filler in sealants, pharmaceuticals, food products and batteries. Discussions are underway for plants with annual capacities of 1,000 to 10,000 tonnes. Last but not least, HPQ Silicon has another ace up its sleeve: the recovery of hazardous black dross generated during aluminium recycling. Until now, almost all of it has ended up in landfill as hazardous waste. The HyDRAS™ process turns it into hydrogen, heat and a recyclable residue. Red mud, another waste product from the aluminium industry, serves as an additive. A patent application for the underlying process was filed in early 2025, with an industrial pilot plant set to follow next.

Three Paths, One Direction

France’s budget remains a work in progress, and nervousness in the bond markets is likely to persist at least until the presidential election in spring 2027. Nevertheless, there is little sign so far of military spending cuts, as there is a rare consensus in Paris on the need for a stronger army. Investors seeking to benefit from this will find very different opportunities and risks in the three stocks presented.

Daimler Truck offers a solid combination of valuation and distributions. The Zetros order secures predictable revenues over 10 years and cushions fluctuations in the civilian truck business. On top of that, it offers 30% share price upside and a dividend yield of more than 4.5%. Airbus is the more expensive stock, but its order books are filled for a decade. The defence division has shed its role as a problem child and now makes a noticeable contribution to earnings. The quarterly results on October 28 could provide fresh impetus.

HPQ Silicon is in a different league. The stock faces several turning points. In the coming weeks, Novacium expects feedback from the French army on the radio batteries. In parallel, laboratory tests at Aptera Motors and planning for fumed silica plants are under way. If the leap from testing to series production succeeds, the current market capitalisation of only around CAD 60 million is unlikely to remain tenable. The CAD 0.13 share price (EUR 0.08 on German trading venues) has enormous potential, especially if analysts and institutional investors take notice. However, as a micro-cap, it must be expected to have greater share price fluctuations than established large corporations.