The space sector looks poised for notable growth during the next few years, carried by several structural growth trends such as:

• Earth Observation (EO)

   

  is seen to continue its growth trajectory (7% CAGR until 2030e), as demand for EO satellites should be driven by increasing number of satellite data applications like smart farming or CO2 monitoring.

   

  ESA's EO strong commitment is underpinned by its Copernicus program.

   As OHB is one of the world's leading EO satellite manufacturers, the underlinying market growth should increasingly become visible in its order intake growth during the next few years.

• Defence & security spendings are already seeing significant growth: Russia's invasion of the Ukraine fundamentally changed Europe's view on defence and security, as the new opponent of the West (Russia) has space capablilites (unlike ISIS or Taliban). This should trigger

   

  institutional demand for defence and security in and from space. While the first wave of budgets should flow to land systems, the second wave of defence spending should flow to space defence and security, which benefits

   

  OHB. For example, OHB is leading the feasability study for "Odin's Eye" which will be a space-based missile early warning system and bids on the

   

  SatcomBw3

   

  contract.

Improving profitability around the corner. In the past, OHB has taken on new projects with the goal to gain capabilities and technology know-how at the cost of P&L effective research and development costs. Now, OHB can rely on a broad expertise with a strong product offering built around satellites for all applications and orbits. Therefore, the company should be able to achieve higher margins with future projects. As the company's capex cycle should gradually come to an end, we expect stable D&A expenses going forward, which are seen to further support our margin expectations; by 2026e, the group's EBIT margin is seen to gradually increase to 8%.

On the back of strong current trading as reflected by the company's record Q1, which is likely to continue during the remainder of the year, OHB is seen to be well on track to reach its FY 23e guidance. Paired with upcoming positive newsflow such as imminent new contract signings like IRIS² or SatcomBw3, the share price does not reflect OHB's prospects, in our view.

BUY with unchanged PT of € 48.00, based on DFC.