Safran Increases Revenue and Cash Flow Guidance; Shares Offer Around 50% Upside

No major surprises as wide-moat Safran reported organic revenue and recurring operating income growth of 17% and 54%, respectively. Reported top-line growth of 24.5% was boosted by favorable U.S. dollar/euro foreign exchange moves. Growth was driven by the continued recovery in narrowbody aircraft traffic and the demand for services across all business divisions. Full-year sales and free cash flow guidance was increased mainly on the back of foreign exchange moves in the former and advanced payments for the latter. Midpoint sales of EUR 18.3 billion is now expected to be 1% higher on the back of a 4% strengthening of the U.S. dollar versus the euro, which actually implies a 3% lowering of the organic guidance. We attribute this to supply chain bottlenecks affecting delivery schedules. The 13% operating margin target is unchanged.