Hensoldt, Volatus Aerospace, Saab – Promising opportunities in the second line of defense

Hensoldt – Boosted by the German Armed Forces

Alongside Rheinmetall, the developer of high-precision sensor and electronics solutions, such as radar, optoelectronics, and avionics systems, is considered the most well-known German defense company listed on the German stock exchange. And its performance since Russia's invasion of Ukraine has been impressive. To date, Hensoldt shares have gained over 560%, currently trading at EUR 97.85.

And due to Germany's rearmament, the Munich-based company's order books are expected to remain full. Order intake in 2024 is projected to exceed revenue by 60 to 90%, significantly more than management had previously anticipated. The reason for this is the massive acceleration of new procurement projects by the German Armed Forces, for which numerous parliamentary approvals have now been granted. Notably, the federal government holds a 25.1% stake, securing itself a blocking minority and underscoring Hensoldt's strategic importance for Germany's defense capabilities.

Just a few months ago, the Company was calculating a book-to-bill ratio of 1.2. Now, the tailwind from the federal government's special fund is fully impacting the balance sheet. CEO Oliver Dörre speaks of orders that are "ten to twenty times higher" than in previous years, with particular focus on the new Luchs II reconnaissance tank, for which Hensoldt supplies key sensor and electronics technology.

Looking ahead, Hensoldt aims to increase revenues to around EUR 6 billion by 2030, more than doubling today's figure. Revenue of around EUR 2.5 billion is expected for the current year, with an operating EBITDA margin of over 18%, exceeding previous forecasts.

Volatus Aerospace – Drone pioneer enters scaling phase

Compared to billion-dollar corporations such as Rheinmetall or Hensoldt, the Canadian company, valued at CAD 426.49 million, offers significantly greater growth potential and could emerge as a key player in a rapidly expanding future market with the establishment of its new innovation and manufacturing center at Montréal–Mirabel Airport.

In the future, drone platforms will be mass-produced in a 200,000 sq ft site - a crucial step in meeting the growing demand from defense and industry.

Volatus' business model rests on three strong pillars: industrial services, defense technologies, and training. This combination provides the Company with both stability and growth.

In the civil sector, Volatus recently secured a long-term contract worth around CAD 15 million with one of the largest North American power grid operators, covering a network of over 100,000 miles that promises long-term, high-margin revenues. The global market for drone inspections is expected to exceed USD 23 billion by 2027.

Demand is also growing strongly in the military segment. NATO countries are increasingly seeking reliable partners within the alliance, and Volatus has already established itself as a technology supplier to the West. After several NATO contracts, the defense business continues to grow steadily. The recent contract extension in the reconnaissance segment to CAD 1.7 million demonstrates strong customer confidence.

With the new Mirabel manufacturing facility, Volatus is now entering the scaling phase. CEO Glen Lynch emphasizes: "Mirabel will be our anchor point for Canadian-made defense-grade drones." Supported by the Quebec government and Ottawa's rearmament program, which aims to increase defense spending to 2% of GDP, Volatus is strategically well-positioned for further growth.

Saab – On the verge of a historic deal

The Swedish defense and security group Saab AB, which manufactures the Gripen multi-role fighter aircraft, radar systems, electronic warfare systems, and underwater weapons, among other things, has been little known until now, at least on German stock exchanges. Saab is considered one of the most important European providers of integrated defense solutions and works closely with NATO partners and the Swedish government.

The Stockholm-based company is currently facing a potential billion-dollar order: Sweden's new cooperation agreement with Ukraine in the field of air defense could enable the delivery of up to 150 Gripen E fighter jets, a record deal that would catapult Saab to a new level of growth.

The Company is already benefiting massively from the Europe-wide arms boom triggered by Russia's war of aggression against Ukraine and Donald Trump's demand for higher NATO spending. In the third quarter, revenue rose by 17.2% to SEK 15.87 billion, with organic growth even reaching 18%. Operating profit rose by 16% to SEK 1.37 billion, with an operating margin of 8.7%.

Despite a slight decline in order intake of SEK 20.9 billion, the order backlog remains at a record level of over SEK 202 billion. Saab is raising its forecast for the full year: organic sales growth is now expected to be 20 to 24%, with operating profit rising even more disproportionately, supported by positive cash flow.

The order books of European defense companies are exploding. Hensoldt plans to double its revenues to EUR 6 billion by the beginning of the next decade. The Swedish defense group is facing the largest order in its history. Volatus Aerospace is entering the scaling phase.