Defence sector under the lens between Iran truce and NATO summit. Leonardo weak at Piazza Affari

(Il Sole 24 Ore Radiocor)-Defense stocks under the lens amid the treaty in Iran and expectations for the decisions to be taken by the NATO summit, scheduled for today and tomorrow in The Hague. In Milan, the Leonardo - Finmeccanica and Fincantieri are travelling weak. In Paris Thales dropped over 2%; same performance for Rheinmetall in Frankfurt. Thyssenkrupp, on the other hand, rose modestly as it awaited news on the possible listing of its subsidiary Marine Systems.

The spotlight, meanwhile, is all on The Hague where the NATO summit is being held. The general agreement, already reached by the alliance's member countries and which should be ratified during this two-day event, envisages a commitment to increase defence spending in the strict sense to 3.5% of GDP, to which is added an additional 1.5% of GDP for dual-use technologies (infrastructure and military mobility, cyber, space). Yesterday in Parliament, Prime Minister Giorgia Meloni declared that Italy will reach the 3.5% target in 10 years, i.e. by 2035, up from 2% in 2024. This is about 44 billion in expenditure, even including the reclassification of some items according to NATO criteria. Other alliance countries, including Germany, should commit to the 3.5% target in a shorter timeframe (Germany in 2029). The only country that showed perplexity was Spain, which indicated that it could fulfil its incremental commitments in terms of both personnel and military hardware, with an expenditure budget of just over 2% of GDP.

Analysts at Intermonte are positive on Leonardo, which should benefit from government decisions. That is why they reiterated their 'Outperform' recommendation with a price target of EUR 58 on the company's shares. In particular, the experts commented that assuming Italy's GDP grows by 2% per year to 2035, defence spending would increase by around 50 billion over 10 years (i.e. 5 billion per year) to 95 billion in 2035, with procurement and R&D (of which Leonardo would have a share) estimated at 30% and an impact on revenues of a few points of additional growth per year. "Leonardo is partly exposed to military spending in the broader sense (1.5% is equal to an additional 50 billion in additional spending over ten years) and is well positioned to capture the increase in electronics spending for the European level," they concluded.

On Fincantieri, on the other hand, they are more cautious ('Neutral' with a price target lower than stock market prices at 13.8 euro). The stockbroker's sim called for the listing of Marine Systems by the Thyssenkrupp group, which practically blocks the plans for closer collaboration with Fincantieri on which the stock exchange had bet. In fact, the stockbroker recalls that in recent months on several occasions the company's CEO himself, Pieroberto Folgiero, has returned to reiterate his favourable opinion in order to expand commercial collaboration and not only with the German company, while always leaving it up to the German institutions to define the best path to make the division an autonomous entity. For Intermonte, however, the Fincantieri-Marine Systems axis will remain intact. "We believe that the spin-off and listing of the German group's division will not change the winning partnership between Fincantieri and the manufacturer, which has been going on for 25 years and which led to the construction of the first hydrogen-powered submarine," commented the sim's analysts, also recalling the signing last April of the agreement between Fincantieri and Thyssenkrupp Marine Systems with the aim of winning the tender announced by the Philippines Navy as part of the submarine fleet modernisation programme.