Chemring – with the agility to rapidly react to urgent customer needs, this group’s shares, which are up 33.4% in two months, are climbing to New Highs with substantial upside

04.06.2025

Yesterday’s announcement of its Interim Results to end-April by the Chemring Group (LON:CHG) were very well received by investors, pushing the shares up nearly 7%, some 33p to close at 520p – after hitting 530.53p a new All-Time High, with 4,160,231 shares traded on the day, some three times the daily average.

That also shows an excellent 33.4% price gain since my April setting of a new Target Price for the group’s shares (on Wednesday 2nd April, then @ 389p new TP of 480p).

The first-half trading period ended with a record Order Book of £1.3bn, up 28% on the same period last year, giving it excellent medium-term revenue coverage.

And there is so much more to come!

Management Comment

CEO Michael Ord stated that:

"Our 2024 momentum has continued into this year with another period of record order intake and an order book of over £1.3bn, increasing 2025 order cover to 85%.

With this robust demand and trading environment the Board's expectations for the full year are unchanged. 

Operational and trading performance has been in line with our expectations, with improving returns for our shareholders underpinned by solid cash conversion. 

Both sectors benefitted from the receipt of several significant orders in the period, evidencing confidence in our market-leading products and services.

With growing geopolitical uncertainty resulting in increased defence expenditure, particularly across NATO, the Group is well positioned, with a strong and sustainable platform to increase revenue to £1bn by 2030."

The Business

For over 100 years, in over 50 countries, Chemring, which employs some 2,700 people worldwide and has production facilities in four countries, has been supplying innovative solutions to the world’s most demanding customers in the aerospace, defence and security sectors.

Its sensors and information side covers advice, design, engineering, research and solutions. Its offer range takes in: electronic warfare; explosive ordnance disposal; chemical and biological detection; and innovation, technology and data science.

The Romsey-based group’s countermeasures and energetics side is the world leader in the design, development and manufacture of advanced expendable countermeasures and countermeasure suites for protecting air, sea and land platforms against the growing threat of guided missiles.

Advanced flares, special material decoys, naval countermeasures, explosive materials, aircraft safety components, pyro-mechanisms, conventional flares, chaff, space launch initiators and release mechanisms, missile and electronics, breaching and demolition, extruded double base propellants – they cover the gamut.

Group Strategy

Chemring is a technology-driven mid-tier defence and security company operating in specialised, high-barrier to entry markets where its differentiated capabilities provide a clear competitive advantage.

Its growth strategy is built around three core strategic pillars - Grow, Accelerate, and Protect - designed to drive long-term value creation, scale our presence in key markets, and strengthen its position as a trusted partner in defence and national security.

Group Outlook - Full Year and Longer Term

The full-year expectations are unchanged, supported by order coverage as at 30th April 2025 of some 85% of expected 2025 revenue, and with a similar H2 weighting of operating profit to last year.

The market backdrop for defence is increasingly robust.

The Group's longer-term growth prospects are strong, underpinned by robust activity levels, its leading technological offerings, its people, its order book and pipeline of further opportunities, high barriers to entry, the investments it continue to make in its strong, high-quality business and the potential for further bolt-on opportunities over time.

The company remains on track to achieve its ambition to increase its annual revenue to c.£1bn by 2030.

It will continue to focus on cash generation and maintaining a robust and deployable balance sheet to enable opportunities for further growth.

With market-leading innovative technologies and services that are critical to its customers Chemring is confident that it will continue to deliver both robust organic and inorganic growth, balancing near-term performance with longer-term growth and value creation.

The Group’s Investment Proposition

The Group states very clearly that its Investment Proposition is to deliver profitable growth by operating in markets where it has differentiators, such as intellectual property, niche technology and high barriers to entry.

The Equity

There are some 273m shares in issue.

The larger holders include Invesco Asset Management (7.81%), Old Mutual Investment Group (5.10%), Royal London Asset Management (5.00%), JO Hambro Capital Management (5.00%), Threadneedle Asset Management (4.97%), Jupiter Asset Management (4.97%), BlackRock Investment Management (4.95%), Schroder Investment Management (4.93%), Schroder Investment Management (4.93%), Aviva Investors Global Services (4.90%), and FIL Investment Advisors (4.84%).

My View

The significant capabilities of Chemring position it well to contribute to both current and emerging defence and security requirements across multiple markets.

It feels like decades that I have been following this group and I continue to be chuffed, or should I say ‘chaffed’ at its performance.

Its shares are a very Strong Hold at the current 520p, at which the group is valued at only £1.42bn.

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

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

(Profile 02.04.25 @ 389p set a Target Price of 480p*)

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