4 May 2017 Global Equity Research Aerospace & Defense Global Aerospace & Defence The Ideas Engine series showcases Credit Suisse’s unique insights and investment ideas. THEME Research Analysts Olivier Brochet Winter is coming; structural change likely for 44 20 7888 8508
[email protected] the aerospace supply chain Robert Spingarn 212 538 1895 ■ Reducing the margin gap: In this Ideas Engine Series report, we analyse
[email protected] how airframers like Airbus and Boeing can leverage technology disruptions Julian Mitchell to reduce the margin gap with their suppliers, drawing on the expertise of 212 325 6668
[email protected] Credit Suisse's global research teams across the whole aerospace supply Andre Kukhnin, CFA chain. The profit impact will be gradual but we believe it will be instrumental 44 20 7888 0350 in reducing the valuation gap, with suppliers ex aerostructures trading on
[email protected] 2019E EV/EBIT of c.12.0x, while airframers trade on c.8.0x on average. This Charles Brennan CFA would expand and perpetuate the significant gap reduction that we expect 44 20 7883 4705
[email protected] over 2017-20E (see Figure 1), as airframers' earnings grow with volumes. Curt Woodworth, CFA Figure 1: Airframers' / suppliers' operating margin gap 212 325 5117
[email protected] 20.0% 20.0% 15.0% Neil Glynn, CFA 15.0% 44 20 7883 6929 10.0%
[email protected] 10.0% Specialist Sales: Andrew Bell 5.0% 5.0% 44 20 7888 0479 0.0%
[email protected]