Deutsche Bank Starts Kongsberg Coverage With Buy Rating Based on Missile Growth

Deutsche Bank has initiated coverage of Norwegian defense firm Kongsberg Gruppen ASA with a buy rating and a price target of NOK360. The bank cites the company's potential to become one of Europe's fastest-growing defense primes. This outlook is based on a record order backlog and capacity expansions within its missile and air defense segments.

"Kongsberg’s all-time-high backlog and rapid capacity expansion could make it one of Europe’s fastest-growing and most profitable defence primes, with margin upside relative to what he called conservative management targets," said Sriram Krishnan, analyst at Deutsche Bank, in a report.

Growth Drivers and Capacity Expansion

The firm's growth is tied to its missile business, which is projected to achieve a compound annual growth rate (CAGR) of approximately 40% through 2030. This expansion includes a planned 50% increase in production capacity for cruise missiles and the scaling of the "Zone5" low-cost missile line to meet high-volume demand.

Kongsberg has set a revenue target of NOK100 billion by 2029. This goal relies on a record order backlog of NOK158 billion, which provides visibility into future production schedules as European nations replenish and expand their defense inventories.

Strategic Position in European Defense

Kongsberg supplies the European defense sector with naval, aerospace, and land-based missile systems. The company's ability to scale operations is a central part of the Deutsche Bank thesis, which suggests that management projections may be conservative given the current demand environment.

Investors and industry observers are focused on the company's execution of its capacity-building projects. The ability to convert the backlog into revenue while maintaining margins is the primary metric for evaluating the company's performance against its long-term financial targets.