Topic: Astor announced another strong order intake at its subsidiary Scandiflash whereas European defence newsflow has led to share price volatility. Here's our take:

Scandiflash in full swing. Yesterday, Astor announced a SEK 28m order at Scandiflash (acquired and consolidated as of 1st Oct '24). This is reported to be a follow-up order of an existing customers from a Western NATO country (for several Scandiflash systems, following a first order already made in Oct'24 for$ 4.2m or SEK 43.7m). In our view, this highlights not only the strong demand from existing customers, but also showcases Scandiflash's growth potential, as one customer alone has ordered systems for SEK 72m. In the scenario, that Scandiflash would be able to acquire another similar customer, the subsidiary's sales should easily exceed SEK 100m, in our view. Mind you, FY24 group sales came in at SEK 223m. More importantly, Scandiflash operates highly profitable (FY'23 EBITDA margin: 32%), therefore the strong growth should substantially support the group's profitability, in our view.

Strong defence newsflow. With a likely new government to be formed in Germany by the conservative CDU (Christian Democratic Union) and social-democratic SPD (Social-Democratic Party), early coalition talks have grown around a massive defence and infrastructure spending bazooka of up to € 1tn (c. SEK 11tn), which would support equipment suppliers across Europe. With its recently established German subsidiary (A

stor Group Deutschland GmbH) Astor has laid the foundation to get a piece of the pie. Significantly increasing defence budgets should be in the cards across Europe with president Trump repeatedly demanding European countries to take care of their own defence and stop relying on the US. 

Our view remains, that NATO countries are on an irreversible path to massively increase defence spendings for at least another decade, providing defence exposed companies with strong growth prospects for for the foreseeable future. Thanks to its unique set-up and the ability to add further companies/technologies onto the group, we regard Astor as extremely well positioned to capture this growth. In light of the well-filled M&A pipeline highlighted during the company's recent earnings call and the CFO's statement to not slow down acquisition efforts, we would expect further good newsflow from M&A. 

While the stock is likely to remain volatile, share price setbacks provide great BUYing opportunities, in our view. We remain bullish and reiterate our SEK 30 PT based on DCF with a BUY rating.