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Thales to Benefit From Dassault Jetfighter Sales: Pro

Reports that Brazil might follow India in purchasing the Rafale jetfighter from French plane maker Dassault Aviation will not only benefit to Dassault, but will also help electronics group Thales, Francois Mallet, managing director head of equity at Kepler Capital Markets said on Monday.

A French Rafale fighter jet
Gerard Julien | AFP | Getty Images
A French Rafale fighter jet

“Twenty-five percent of the price of a Rafale (plane) is derived from Thales,” Mallet said, “because they produce all the embedded systems.”

Brazil did not want to be the first country to buy the aircraft, Mallet said, but reports that India is likely to buy up to 126 Rafale jetfighters might have changed things.

“It has been reported that India is not even looking at the Eurofighter any longer,” Mallet said. “It seems like the Saab Gripen that the Swiss had chosen over the Rafale was not the most efficient one in the end…so there is a possibility that Switzerland may change its position.”

Plane maker Dassault has been struggling to sell its Rafale jetfighter for years. Brazil, Switzerland, Morocco, and the United Arab Emirateshave all at some point been reported as potential clients for the airplane, but has Dassault has not been able to seal the deal before.

The contract for 126 pieces to India would be worth $12 billion, 25 percent of which would go to Thales, 25 percent to Safran and 50 percent to Dassault. Brazil is reported to be “very likely” to purchase at least 36 aircrafts.

“We’re really optimistic on Thales, which has gone through a big restructuring program that increased its productivity,” Mallet said. With the impact of the extra orders from India and Brazil, he has a 34 euro price target for Thales. The stock is currently trading around 27 euros ($35.66).

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Disclosures:

Neither Francois Mallet nor Kepler CM hold any position in Thales, Safran, or Dassault Aviation

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