Filtronic (LON:FTC) – the good news continues but be cautious of chasing the shares

15.05.2025

Following on from its Trading Update issued 9 days ago, on Tuesday 6th May, when the designer and manufacturer of products for the aerospace, defence, space and telecoms infrastructure markets, revealed that the outlook for both FY2025 and FY2026 is expected to exceed current market expectations, the group has today announced a new contract win to develop and supply advanced filter and diplexer assemblies to Airbus Defence and Space, for the supply of additional satellites to Eutelsat OneWeb.

Management Comment

CEO Nat Edington stated that:

"This contract win aligns with our strategy to expand capabilities in the space sector and places more of our technology on to operational satellite payload systems.

We are delighted to have won a second contract with a European space provider, following our announcement on 23 April 2025, highlighting the role we have to play within this high-growth market and broadening our customer base."

Broker’s View

Analysts Edward Stacey and Kimberley Carstens, at Cavendish Capital Markets, are obviously impressed at the news stating that:

“Filtronic has announced a new space payload contract win with revenue contribution in CY26.

The announcement supports our FY26 forecasts and we make no change.

We believe that the potential of the initial contract will lead to a growing revenue opportunity going forward.

The contract is with Airbus Defence and Space for the development and supply of payload connectivity technology for the first batch of replacement Eutelsat OneWeb satellites.

This is part of the next phase of the AirbusOneWeb collaboration, and importantly it signals the potential for further contract order flow for the remainder of the constellation roll-out.

This marks Filtronic’s second recent contract with a European space provider, following ESA/Viasat announced in April.

It is also in line with its growth strategy across its space market capabilities, customers and industry presence in both ground station and payload opportunities.

After an encouraging upgrade in Filtronic’s trading update in early May (the fourth revenue upgrade year-to-date) we continue to anticipate strong growth over the next two to five years both in its space-related business and other markets such as defence.

In light of the strong progress on multiple fronts, we are revisiting the assumptions behind our valuation model and raise our target price from 110p to 158p, a 34% upside to the current share price.”

The brokers have estimates out for the current year to the end of this month to show revenues more than doubled to £55.0m (£25.4m), while more than quadrupling its adjusted pre-tax profits to £14.1m (£3.4m), lifting earnings per share to 5.9p (1.4p).

However, for the coming year their figures suggest that the group could see lower sales at £50.0m, with profits easing back to £8.3m, worth just 3.2p per share in earnings.

My View

I remain a total fan of this £275m-capitalised business – its potential is absolutely massive!

But I feel that investors must be wary of pushing the group’s shares too high, instead they should wait to see more business helping to pump up the group’s profitability, which will then totally support a higher price for its shares.

This morning, they have touched 127p in reaction to the new Target Price from the brokers and are now 125p on the back of small profit-taking.

(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*)

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