Source: Sharecast
RBC Capital said demand backdrop for energetics has "become increasingly attractive", boosted by depleted US munitions stockpiles, underpinning the stock's core investment case. "This combined with an uptick in customer engagement in H1, suggests continued order book growth for Energetics," said RBC.
The Canadian bank, which has an 'outperform' rating on Chemring, said the case for incremental energetics capacity additions also remains a potential catalyst.
"While execution risk remains for H2, increased order cover at S&I is a plus point," it said, noting that management recently maintained its FY26 guidance for 70% of operating profits to come in H2.
RBC made "minor estimate changes" reflecting adjusted splits between Chemring's divisions, most notably dropping its earnings per share estimates by 4% on average on increased share count estimates.
"We had previously modelled in the £40m share buyback programme in full for FY26/27 (of which £8.7m has been completed), but now remove this from our estimates," said RBC, which noted that Chemring has paused buyback activity.
However, clearly increasing leverage was Chemring's ongoing investment into Norway, leading RBC to increase its FY26 net debt estimate to £192m - above consensus estimates of £166m.
Reporting by Iain Gilbert at Sharecast.com