Dassault Aviation Books Several Orders After Year-End; Fair Value Estimate Unchanged

Narrow-moat Dassault Aviation’s full-year 2020 revenue of EUR 5.5 billion declined by 25% from 2019, resulting in a 66% drop in EBIT to EUR 261 million due to an under-recovery of fixed costs. Total deliveries of Rafale and Falcon jets declined to 47 compared with 66 in 2019. The new order intake to the value of EUR 3.5 billion is about 40% lower compared with 2019, mainly due to the nonrecurrence of a large Rafale long-term service contract signed in the prior period. The current group order backlog is EUR 15.9 billion, equating to slightly over two years of sales. The group is guiding for deliveries of 25 Rafale jets and 25 Falcon business jets in 2021, and for sales to increase. Profitability should benefit from a lower cost base and higher fixed-cost recovery. We maintain our fair value estimate of EUR 1,400 per share and believe shares are undervalued, but note the high uncertainty rating stemming from the low-volume, high-value nature of the group’s products.