Chemring Group – is it now time to take a gamble with this high-tech group, shares 475p, TP 630p

Mark Watson-Mitchell - 04.12.2025

Next Tuesday morning, 9th December, the Chemring Group (LON:CHG) will declare its Final Results for the year to end-October.

Having followed this advanced technology products group for decades, I am not at all worried about the high price-to-earnings ratio of its shares – simply because this really is a cracking business, whose Order Book is growing at quite a pace.

Less than a month ago, the group, well known for its ‘chaff’ products, issued a Trading Update for that year, indicating that its FY25 adjusted operating profit was in line with market expectations.

Analysts who follow the company, have a consensus average Target Price of 630p out on its shares, which ahead of next week’s statement are currently trading at around 475p, valuing it at £1.28bn.

The Business

The Chemring Group is a UK-based business that designs, develops, and manufactures technology solutions for the defence, security, aerospace and safety sectors.

Its products include sensors, countermeasures, and energetic systems such as to detect and disable threats like IEDs, unexploded ordnance, and chemical and biological threats; products to protect aircraft, ships, and land platforms from guided missile threats; pyrotechnics and munitions for use in the navy, army, and air force and energetic systems components for the space sector, including propellants, explosives, missile and ammunition components, and thrusters.

The Romsey, Hampshire-based group, employs some 2,700 people worldwide, and has production facilities in four countries, meeting the needs of customers in more than fifty countries.

It is organised under two strategic product segments: Sensors & Information and Countermeasures & Energetics.

The group has a diverse portfolio of products that deliver high reliability solutions to protect people, platforms, missions and information against constantly changing threats.

Operating in niche markets and with strong investment in research and development, Chemring has the agility to rapidly react to urgent customer needs.

Trading Update

On Monday, 10th November, the group reported that it expects its FY25 adjusted operating profit to be in line with analyst expectations, with an adjusted operating margin of approximately 14.7%, driven by strong performance in Energetics which offsets softness in Sensors & Information.

The company's net debt is projected to be around £95m, and its Order Book at the year-end had grown to £1.3bn (£1.0bn), supported by significant contract wins including a $65m framework contract for aircrew flight equipment tester systems and a £24m order for rocket motors.

Alloy Surfaces, the group’s US countermeasures subsidiary, will be reported as a discontinued operation as strategic options are assessed.

As far as the group’s outlook is concerned, it continues to see robust market conditions, with increasing customer demand for its technology-driven solutions and a resurgent demand for traditional defence capabilities.

This strong outlook is expected to be maintained.

Profit Guidance

On a continuing operations basis, when adjusted for Alloy Surfaces, which will now be accounted for as a discontinued operation, the group believes analyst forecasts for adjusted operating profit for the year to end-October inclusive of ASC are currently in the range of £73.3m to £77.4m, with a consensus of £75.8m.

Annual normalised revenue for ASC would have been c.£25m and its operating profit c.£3.5m.

However, given actions taken as part of the strategic review during the year, ASC is expected to report a loss of c.£3m as part of discontinued operations and the FY25 results will also include several one-off costs, of which c.£5m are expected to be cash related.

In My View

From their 614p High scored in September, the group’s shares had already fallen back to 550p, a few days before the November Update was issued.

Subsequent to the Update, they have since eased to the current 475p level, at which price the Order Book strength and average brokers'

Chaffing away

TP’s underline the group’s attractions – next Tuesday’s statement could well help to turn them upwards again.

(Profile 20.06.19 @ 177p set a Target Price of 300p*)

(Profile 20.10.23 @ 278p set a Target Price of 350p*)