Morgan Stanley upgrades Indra to “overweight” on defense pivot, €47 PT

Investing.com -- Morgan Stanley (NYSE:MS) has upgraded Indra (BME:IDR) to "overweight" from "equal-weight" and raised its price target to €47 from €21.50, citing the company’s accelerated transition into a defense-focused business. 

The upgrade follows a year-to-date share price gain of over 90%, driven by increasing investor recognition of Indra’s growing exposure to the aerospace and defense sector.

Analysts at Morgan Stanley project that aerospace and defense will account for more than two-thirds of Indra’s EBITDA by FY26, up from 51% in FY24. 

The defense segment has delivered over 20% organic revenue growth in the past two years and operates at around an 18% EBIT margin. 

Indra’s defense and ATM units outperformed the group, with expected FY25/FY26 defense growth at 20% and 15%, respectively. 

These segments now anchor the investment case, contributing to a forecasted 13% EPS CAGR from FY24–27.

Despite the strong rally, the stock trades at 15x CY26 adjusted P/E—still below the 31x average of European defense peers. 

Applying a sum-of-the-parts valuation, Morgan Stanley assigns 31x P/E to the defense segment, 20x to ATM, and 9x to Minsait and Mobility, implying a fair value of €47. 

The new valuation suggests a 40% upside, with Indra’s adjusted P/E still at a discount to Thales (EPA:TCFP) (23x), a close European peer.

Indra’s transformation is supported by both organic expansion and M&A. Its pending acquisition of Hispasat, expected to close in 4Q25, is projected to contribute €400 million in revenue and €190 million in EBITDA in FY26. 

The company targets €1 billion in space revenue by 2030, up from under €50 million currently. Post-acquisition, net leverage is expected to rise to 0.6x EBITDA from -0.2x.

Forecasts for FY26 include total revenue of €6.07 billion, EBITDA of €864 million (14.2% margin), and EBIT of €599 million (9.9% margin). 

Adjusted EPS is expected at €2.30, up from €2.07 in FY25. Around 50% of FY26 organic defense revenue is already contractually committed, enhancing visibility. 

Indra also guides for ~8% organic revenue CAGR and ~15% EBITDA CAGR between FY24–26.

Broader macro trends bolster the outlook. Spain has pledged €10.4 billion in additional military spending in 2025 to meet NATO’s 2% of GDP target. 

Although the country resists NATO’s 3.5% goal, even sustained 2% spending would expand the addressable defense market by 50% through 2030. 

Morgan Stanley expects Indra’s order intake to nearly double year-on-year in 2025 to €2 billion.