Goldman Sachs upgrades Indra to “buy,” raises price target to €45 on defence tailw

Published 09/07/2025, 09:46
© Reuters.

Investing.com -- Goldman Sachs has upgraded ndra Sistemas (OTC:ISMAY) to “buy” from “neutral,” increasing its 12-month price target to €45 from €33, citing improved earnings potential driven by increased defense spending across Europe, particularly in Spain. 

The stock has gained about 115% year to date, but Goldman Sachs sees further upside, noting that current valuation does not fully capture structural tailwinds and improved financial fundamentals.

The upgrade follows revised growth estimates across Indra’s core segments. The defense division, which contributed about 20% of 2024 revenue and 40% of EBIT, is now forecast to grow at a 22% CAGR between 2025 and 2029, up from 12% previously. 

Spain’s increased military budget, up €10.5 billion to reach 2% of GDP in 2025, provides a key catalyst. 

Indra is eligible to bid on 30 programs totaling €3.6 billion. Goldman Sachs estimates the company could capture between 6% and 27% of these contracts.

The Air Traffic Management segment, comprising 10% of 2024 revenue, is projected to post a 10% CAGR through 2029, slightly above the previous 9%, driven by modernization programs and increased presence in North America. 

Minsait, Indra’s IT services arm, is expected to grow at a 5% CAGR, revised from 4%, aided by digital transformation initiatives and selective M&A. Group organic revenue is now forecast to grow at 10% CAGR from 2025 to 2029, up from 7% earlier.

EBIT is expected to grow at 14% CAGR over the same period, an improvement from 8%, due to increased contributions from higher-margin defense activities. EBIT is now projected to reach €824.4 million in 2029, up from the earlier estimate of €686 million.

Adjusted EPS is forecast to grow 14% annually, with estimates raised by 1%–20% across 2025–2029. 

Free cash flow (FCF) projections were lifted by up to 19%, with 2029 FCF forecast at €602 million. Cash conversion is expected to remain stable at around 101%, while net debt is projected to stay below 1x EBITDA through 2026.

Goldman Sachs did not include the recently announced acquisitions of Hispasat and Hisdesat in its base case, as the deal is pending closure. 

However, it estimates the acquisition could be 6%–8% accretive to adjusted EPS over 2026–2030. 

Indra has also made a non-binding €1 billion offer for Iveco’s defense business and completed its acquisition of a majority stake in TESS in June 2025.

Goldman Sachs sees a 3:1 risk-reward skew if Indra exceeds baseline expectations on defense contract wins.

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