Although the shares of SpaceX supplier Filtronic have quadrupled in 2024, Mark Watson-Mitchell sees them rising a lot further, the shares now 76p, have broker Targets of 92p, he sees them even higher

17.12.2024

Yesterday morning Filtronic (LON:FTC) announced its Trading Update for the six months to end-November, declaring that its Final Results for the year to end-May 2025 are now likely to exceed previous market expectations. 

In response the group’s shares closed at 76p, up 5p on the day, a 7% rise following the new guidance. 

The Business 

The Sedgefield, Durham-based group is a designer and manufacturer of products for the aerospace, defence, space and telecoms infrastructure markets. 

The group has been winning various contracts from SpaceX, for whom it is now a supplier of its E-band Solid State Power Amplifiers. 

This year it has signed a major 5-year Strategic Partnership with SpaceX, a market leader in low earth orbit space communications, for the supply of Cerus solid state power amplifier products at multiple frequency bands. 

It has also won contracts with the European Space Agency, BAE Maritime Services and Qinetiq, as well as continuing business with the UK Defence Science and Technology Laboratory. 

We already had an indicator of better times when the group held its AGM in late October. 

At that time the company stated that it anticipated that its first half-year would be stronger than the second half. 

Perhaps cautiously at the time it stated that:  

“This gives confidence of delivering results for the full year in line with market expectations.” 

Two weeks later, the group announced that it was adding a new engineering design centre at the Cambridge Science Park, which will provide Filtronic with access to a vibrant network of key industry players, research institutions, and highly skilled radio frequency engineering talent to execute on its growth plans.  

It is also expected to enable the group to enhance its technical capabilities, foster collaboration, and accelerate product innovation in high-frequency communications, while enhancing its ability to support new and existing clients in the region, as well as providing a base for collaborative projects aimed at pushing the boundaries of RF and mmWave technology in mission-critical applications. 

CEO Nat Edington stated that: 

"Opening an office at Cambridge Science Park is a pivotal step in our growth strategy.

Cambridge's thriving ecosystem of technology and innovation is an ideal environment for Filtronic as we continue to develop resilient, high-performance solutions for demanding environments.  

This expansion underscores our commitment to investing in the future of UK engineering and supporting the country's ambitions in Space and Defence." 

Yesterday’s Trading Update 

Filtronic declared that it expects to report a strong set of results for the period with significant growth in revenue and profits.  

Customer demand remains robust with the second half benefitting from pull-forward of customer orders.  

Consequently, the Board now expects to deliver stronger results for the full year than current market expectations. 

CEO Nat Edington stated that:  

“We are delighted with the continued momentum that we have achieved and look forward to focussing on delivering these increased expectations over the remainder of the year.” 

Brokers View 

Analysts Edward Stacey and Kimberley Carstens at Cavendish Capital Markets look for the group’s shares to rise to almost 92p in due course. 

Their upgraded estimate that the current year to end-May 2025, will now see revenues of £43.4m (£25.4m) while raising the adjusted re-tax profits to £9.6m, with 4.0p (1.4p) earnings per share. 

For the coming year to end-May 2026, they see £41.0m sales and £7.9m profits, generating 3.0p of earnings per share. 

They concluded their note on the group, when its shares were 72p, by stating that: 

“We believe Filtronic has a strong growth outlook for FY25 and for the medium term with good visibility on its underlying drivers including the Starlink partnership. 

We value the shares using a medium-term valuation scenario based on £50m of revenue potential.  

Our price target of 91.9p represents 28% upside to the current level.” 

My View 

At the end of July this year, when the shares were just 71p, I suggested that I saw them going to well over 100p within the next year.  

After touching 79p at one stage, they are now 76p, but are on their way up again, so I stand by that prediction. 

(Profile 04.02.22 @ 11.6p set a Target Price of 14.5p*) 

(Profile 04.01.24 @ 21p set a Target Price of 24p*) 

(Profile 26.06.24 @ 67p set a new Target Price of 80p*) 

(Asterisks * denote that Target Prices have been achieved since Profile publication)