Avio shares surge on the stock market; Berenberg analysts recommend buying

(Il Sole 24 Ore Radiocor) - A surge for Avio on the Milan Stock Exchange, where the aerospace company’s shares are being buoyed by an upgrade from Berenberg analysts. The analysts have upgraded the rating to ‘buy’ from ‘hold’ and raised the target price to 39 euros from the previous 33 euros. The experts’ positive assessment is driven by the market shortage of rocket engines: “US missile budgets are expected to rise from around $36 billion in the 2026 financial year to around $95 billion requested for 2027”, writes Berenberg, with analysts emphasising that “the shortage of solid-propellant rocket engines is structural and is worsening due to ongoing conflicts”.

According to Avio, ‘the propellant shortfall in the United States and Europe will reach 3,400 tonnes per year by 2030, 40 per cent more than a year ago’. For these reasons, the Berenberg report states, “the leading manufacturers of missile systems are seeking an independent supplier with large-scale production capacity, and Avio possesses the operational expertise required to gain market share”.

Berenberg’s bottom-up estimate of the solid-propellant rocket engine market in the United States and Europe ‘is set to rise from around $1.9 billion in 2025 to $5.8 billion in 2030, assuming that engines account for 15 per cent of the value of the rockets’. Based on the quantities required for 2027, “the market would reach approximately $9.5 billion”: the estimate for the defence propulsion segment in 2030 “is equivalent to around 10 per cent of the baseline market estimate, or around 6 per cent in the most optimistic scenario”.

Although experts believe it will take some time, the likely new contracts in this sector are leading to upward revisions in forecasts for 2030. Analysts predict that defence propulsion revenues in 2030 will reach 532 million euros, up from the previous estimate of 312 million. This contributes to an increase of around 17 per cent in projected consolidated net revenue, bringing it to 1.22 billion, and a 42 per cent rise in adjusted EBITDA to 141 million, with a margin of 11.6 per cent compared with the previous 9.5 per cent. This results in a compound annual growth rate (CAGR) for adjusted EBITDA of approximately 32 per cent over the period 2025–2030. “Our estimates for revenue and adjusted EBITDA for 2030 exceed the consensus by 19 per cent and 49 per cent respectively,” the analysts add.