Filtronic – better than expected Interims point to even greater profitability as the SpaceX business increases, shares fell to 96p, but broker increased Target Price to 110p

04.02.2025

Did you know that there are expected to be some 36,900 low earth orbiting satellites by 2033?

That is the first impactful number that I came away with after speaking with Filtronic (LON:FTC) CEO Nat Edington and CFO Michael Tyerman this morning.

If you didn’t know by now, then I will clearly state that I am a big fan of this £215m Sedgefield-based group.

Last year proved to be truly transformational for its business, with the SpaceX orders last Spring almost turning the business on its head.

The Low Earth Orbit (LEO) satellite network programme is driving strong activity within the global space sector – and the demands of SpaceX, the private company some 44% controlled by Elon Musk, is very big news for Filtronic.

As Musk’s business rapidly develops, it is evident that Filtronic will be a big beneficiary of even more orders.

SpaceX has been creating and extending the ability of its Starship programme, with each launch able to carry up to 300 Starlink satellites.

The economics for Starship are centred around the payload ability, with current assumptions of between 1 to 5 payload links per satellite.

This really is very big business for SpaceX and little Filtronic is hanging on the coat-tail as its main customer expands.

Filtronic has already identified its requirement for advanced facilities to handle this and other lines of demand from non-SpaceX clients.

The Interim Results

The six months to end-November 2024 saw revenues up from £8.5m to £25.6m, while the adjusted EBITDA rose from £0.2m to £8.7m, generating earnings of 3.08p (0.24p) per share at the halfway stage.

Strong order inflow from SpaceX in the period aligned with the Strategic Partnership agreement.

Technology developments were reported as progressing well to deliver on future product roadmap in conjunction with the group’s key customers.

Two new production lines were installed in the period to increase manufacturing capacity to support revenue growth.

Chairman Jonathan Neale stated that:

"We are pleased to communicate these strong set of interim results.

Robust order intake has resulted in the improved revenue and profit outlook in H2 which we communicated in market upgrades in December 2024 and January 2025.

Investing in the business to underpin the orderbook has been timely and effective and we look forward to being able to communicate more about the next financial year as things develop during H2.”

Broker’s View

Analysts Edward Stacey and Kimberley Carstens, at Cavendish Capital Markets, increased their Buy rating on the group’s shares, with a Target Price raised to 110p from the recently set 91.9p per share.

Their estimate for the current year to end-May show £48.4m (£25.4m) sales, £11.5m (£3.4m) adjusted pre-tax profits, with 4.8p (1.4p) in earnings per share.

My View

On the basis of the LEO satellite programme, it is well worth noting that there will be an average of seven tons of satellites launched per day over the next ten years.

I believe that Filtronic has the scope and is rapidly developing the ability to handle a considerable increase in its business over the next few years.

Its shares now at 96p, valuing the group at £211m, are a very strong hold and a great tuckaway.

(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 Target Price of 80p*)