BofA update shows where active managers are putting money
On Tuesday, BofA Securities analyst Carlos Peris revised the stock rating for Kongsberg Gruppen ASA (KOG:NO), lifting it from Underperform to Buy. Accompanying this upgrade, the price target was also increased significantly to NOK404.00, up from the previous NOK273.20.
Peris provided a rationale for this double upgrade, highlighting that Kongsberg’s Defence portfolio is well-positioned to address the capability shortages currently observed in Europe and increasingly on a global scale. The analyst emphasized the importance of missiles, air defence, and defence electronics as "pillars of sovereignty," predicting robust demand for these sectors over the next decade and beyond.
Despite Kongsberg’s year-to-date performance lagging behind its Defence peers—a group that has seen material re-rating, primarily driven by companies with shorter cycle/land portfolios—Peris suggests a shift in investor focus towards longer duration themes, which could benefit Kongsberg in the longer term.
The upgrade reflects an increase in the analyst’s earnings before interest and taxes (EBIT) estimates for Kongsberg for the years 2025-2028 by 6-13%. Additionally, the enterprise value to EBIT (EV/EBIT) target multiples for Kongsberg’s Defence Aerospace (KDA), Kongsberg Maritime (KM), and Kongsberg Defence (KD) segments have been raised to 30x, 20x, and 24x, respectively.
This reassessment is based on a stronger growth outlook and the decision to roll forward the valuation to 2030, given the growth visibility of KDA. Furthermore, the conglomerate discount applied in the sum-of-the-parts (SOTP) valuation has been lowered to 5% from the previous 10%, reflecting a more optimistic view of the company’s prospects.
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