Everyday life heavily depends on space. Satellites for communication, navigation, weather forecasts, the monitoring of climate change as well as reconnaissance and space systems for science and exploration missions form the pillar of Europe’s space sector. Additionally, rockets are needed to bring the payloads into orbit.

As a leading developer and manufacturer of satellites, OHB is a well-positioned and the most profitable player in the oligopolistic, European space sector. OHB’s high tech product and service offerings covers most parts of the space value chain. Subsidiaries all over Europe and long lasting institutional contracts from ESA and national space agencies guarantee OHB diversified and long-term revenue streams. Especially ESA’s strong focus on earth observation as well as science & exploration, both OHB’s sweet spots, provide the company with perennial profitable earnings.

Investing in space yields a high return. On average, per $ spent on space missions, $ 3 of economic output is generated back on earth, according to NASA. Hence, governmental space budgets continue to grow, regardless of short-term economic headwinds. Additionally, the ongoing commercialization of the space sector coupled with sinking costs for launches, should pose further growth opportunities.

OHB is ready for the future: Participation in large scale missions to moon and mars, satellite platforms that enable quick and cheap satellite production and OHB’s activities in the exploitation of satellite data and services should give OHB a head start in a growing market. After last year’s ESA ministerial council, we should see significant new order intakes of up to € 1.4bn from both, institutional and commercial customers for FY 2023/24e. While strong demand for OHB’s product and service offerings remains well intact, OHB looks set to double-digit revenue growth until FY 2026e (eNuW: 10% CAGR). Coupled with margin expansions based on scale effects, we expect EBIT to grow at 16% CAGR into FY 2026e (eNuW).

Current trading in relation to OHB’s relevant peer group as well as historic multiples indicate an unjustified undervaluation of the stock, especially given OHB’s strong economic moat in combination with the sector’s strong market outlook.

We launch coverage with a BUY rating and PT of € 48 based on DCF.