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Aerospace & Defence Update

US marketing feedback

Industry Overview

Airbus most discussed, but little appetite to step in 24 June 2024

Last week we were in the US seeing investors. Airbus was the most discussed name Equity
across the wider industrials sector, but clients clearly remain in wait-and-see mode. As Europe
of last night, we estimate Airbus had delivered 48 aircraft, leaving c.24 to deliver Aerospace & Defence
through month end. Whilst we generally disagree with delivery watching this closely, the
market focus for Airbus is if they will need to cut the delivery guide at 2Q. Airbus Benjamin Heelan >>
Research Analyst
guidance for 2024 is ‘around 800’ deliveries, but a weak June could add pressure to the MLI (UK)
outlook. Investors seemed frustrated about Airbus, and while many still believe in the +44 20 7996 5723
[email protected]
mid-term story, we feel investor positioning is the lightest of the last few years with
very little conviction near term. Virginia Montorsi >>
Research Analyst
MLI (UK)
Aftermarket remains a place to hide within civil +44 20 7996 1146
[email protected]
Most clients agreed with our Aftermarket > OE thesis for the coming quarters, with Rolls
Carlos Iranzo Peris >>
the most discussed name. The strong outlook for pricing and the clear operational Research Analyst
improvements made so far have positively surprised. There are growing questions MLI (UK)
+44 20 7995 3016
around time on wing, and where the improvements on the Trent portfolio are coming [email protected]
from. We expect this to be a key focus of the 1H results. Safran was surprisingly low Ronald J. Epstein
down the list of discussion points for investors. Recent comments around LEAP supply Research Analyst
chain challenges were discussed, which likely is margin supportive but challenge cash BofAS
+1 646 855 5695
flow, and 787 delivery challenges weighing on Equipment were discussed. We continue [email protected]
to see the group’s CMD in December as a positive catalyst, and at 22x 2025 PE we think
valuation is attractive for a business we see growing double digits organically mid-term.
Exhibit 1: Sector weekly performance rel
Defence barely discussed – valuation a headwind FTEU 300
Defence was not a focus for many. Elevated valuations on a 12mnth fwd basis meant Weekly stock performance
that most don’t see attractive risk reward here. Most agree with our view that there is
strong visibility mid-term for the defence names in Europe as we rebuild the defence Hensoldt
industrial base and restock depleted supplies. However elections in Europe add a degree Eutelsat
Rolls Royce
of uncertainty and there are concerns around the budget funding situation. We also see a Leonardo
more balanced risk reward here, and with many names trading at premiums to US peers, Airbus
we don’t see material upside for the sector at this point. QinetiQ
Rheinmetall
Safran
Eurosatory feedback - positive msg but little incremental MTU
Dassault Aviation
This week we attended Eurosatory in Paris. Every company delivered a positive message, Thales
with order intake expected to remain strong mid-term. Defence budgets, particularly the BAE Systems
German budget were at the centre of the discussion. RHM, Renk & Hensoldt highlighted SAAB
Vsat
that Germany spending 2% of GDP has become cons view, and the debate now centres SES
on how to finance Defence spending once the Special Defence fund is over (+2027). Kongsberg
Supply chain continues improving progressively, and while it is not out of the woods yet, -10% -5% 0% 5% 10%
it is in a better state than in Civil. On Defence Thales is progressively getting more Source: Eikon (prices as of 20th Jun, 2024)
interest ahead of the CMD (Nov 24), and overall investors are of the view that Thales BofA GLOBAL RESEARCH
could guide for Defence growing HSD mid-term at the CMD.

>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst
under the FINRA rules.
Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take
responsibility for the information herein in particular jurisdictions.
BofA Securities does and seeks to do business with issuers covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Refer to important disclosures on page 19 to 23. Analyst Certification on page 17. Price
Objective Basis/Risk on page 17. 12707179

Timestamp: 24 June 2024 12:30AM EDT

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2 Aerospace & Defence Update | 24 June 2024

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Weekly news round up
Exhibit 2: Global Aerospace and Defence Weekly Newsflow
Major news from the last week in the Global Aerospace & Defence Industry
Weekly newsflow Source
French army places new ammunition order with Thales: French defence and technology company Thales said on Monday it would quadruple its ammunition production capacity
at a domestic site, after winning a new order from the army. France and other NATO member states are keen to step up military production capacity in the wake of Russia's invasion
of Ukraine. "We deeply value the continuing confidence of the French land forces," said Hervé Dammann, Thales vice-president for land and air systems. "This order for 120-mm
ordnance is an integral part of the broader policy to build capacity and we are fully mobilised to meet this requirement, in terms of both production rates and product performance." Reuters
France's joint munitions command has renewed its confidence in Thales with a new order for tens of thousands of 120mm rifled ammunition. To fill the order, Thales will
significantly ramp up output at its La Ferté Saint Aubin site near Orleans, which turned out 20,000 120-mm mortar rounds in 2023 and will produce more than 80,000 a year by
2026.
Belgium orders 17 Airbus H145M helicopters for army, police: Belgium will buy 15 Airbus multi-role H145M helicopters for its army and another two for its federal police force,
the European aircraft maker said on Monday. The H145M is a military helicopter with a broad range of capabilities and can be reconfigured in minutes from a light attack role with
Reuters
guided weapons to a special operations version, including fast rappelling equipment. The U.S. Army employs almost 500 helicopters from the H145 family, Airbus said. The Belgian
order allows for an option of three further H145M helicopters for its police.
GE Aerospace's Larry Culp declined Boeing's request to take over as CEO, WSJ reports: GE Aerospace CEO Larry Culp has declined Boeing's request to consider taking over as
the U.S. planemaker's top boss, the Wall Street Journal reported on Monday. Boeing and GE Aerospace did not immediately respond to Reuters' requests for comment. Culp on
several occasions had said he was not interested in the job. In April, Culp told Reuters he can best serve Boeing by being its best supplier. The Arlington, Virginia-based company had Reuters
said in March Dave Calhoun would step down as CEO by the end of 2024. Board chair Larry Kellner and Stan Deal, head of the company's commercial planes business, were also set
to leave.
Embraer a 'great solution' for carriers to add capacity more quickly, CEO says: Brazilian planemaker Embraer sees itself as a "great solution" for carriers to add capacity more
quickly amid constraints to 'big' narrowbody deliveries in the industry, CEO Francisco Gomes Neto said. The company has seen increased demand for its commercial jets and is
actively working on several sales campaigns it hopes to conclude in coming months, Gomes Neto told reporters at an event at the firm's headquarters. Embraer has production slots
available from 2026, meaning it can deliver on new jet sales before larger rivals Boeing and Airbus, the latter having sold out its production of single-aisle jets until the end of the
decade. The Brazilian firm is gearing up for the Farnborough Airshow next month, when planemakers often announce major orders. Gomes Neto said Embraer hopes this year's
Reuters
event will be "the best show ever" for the company. "We have a positive sales momentum in different business units," the executive said. "Starting with the commercial jets, we have
seen increased demand for our E-Jets, either the E175-E1 or the E2 family." Embraer this month bagged an order for 20 E2 jets from Mexicana de Aviacion, opening a new market for
its second-generation jets, following a major order from American Airlines in March for 90 smaller, first generation E175. Embraer's traditional regional market, where it competes
with its E2 family for 90 to 120 passengers, fits just below the Boeing and Airbus's best-selling 150-seat-plus market. Gomes Neto reiterated that even though Embraer
understands it has the capability to make larger aircraft, at this point there are no concrete plans to move in a different direction from its regional niche.
Embraer sees India, Saudi Arabia, EU, US as strategic defense markets: Brazilian planemaker Embraer sees India, Saudi Arabia, the European Union and the United States as
strategic markets for its defense unit as it looks to expand sales of the C-390 Millennium, the head of Embraer Defense said on Tuesday. India has an open tender to buy military
planes while Saudi Arabia, looking to replace an aging fleet of Lockheed Martin's C-130 Hercules, is currently in "early engagement" with Embraer, Bosco da Costa Junior told
reporters at an event. "They don't have an open tender, but they need to replace their old C-130s. We did a lot of studies and concluded that the (Embraer) C-390 could deliver
additional capability in this replacement process," Costa Junior said. A potential Saudi purchase could reach 25 units, and Embraer expects the country to make a decision in two to Reuters
four years, the executive added. In addition to Embraer's home country Brazil, nations such as Portugal, Hungary, the Netherlands, Austria, the Czech Republic and South Korea have
selected the planemaker's military transportation aircraft. Embraer has also been "aggressive on several fronts" in the United States, Costa Junior said, including exploring
opportunities for mergers or acquisitions as well as pitching the C-390 to the U.S. Marines, Air Force and special forces. "We do believe that the C-390 could add additional value to
those entities in the U.S.," the executive said. "One thing is clear to us: We would like to become a partner of the U.S. government."
GE Aerospace developing hybrid engines for single-aisle jets: GE Aerospace is developing a hybrid electric engine with the hopes it will power next-generation narrow-body jets
by the middle of the next decade. While the technology is still being tested, should GE be successful, it could produce hybrid-engine jets - like a Toyota Prius of the skies - that would
go a long way toward cutting the aviation industry's carbon emissions worldwide, half of which come from single-aisle jets. Hybrid cars are common on the roads, but decarbonizing
the aerospace industry is considered much more difficult. In hybrid engines, an aircraft uses several energy sources while in flight. Airbus estimates the mix of energy sources - jet
fuel or sustainable aviation fuels combined with electricity – reduces fuel consumption by up to 5% compared to a standard flight. GE Aerospace is working with NASA on a project
Reuters
that will embed electric motors or generators in a high-bypass turbofan to supplement power during different phases of operation, company executives said. On Wednesday, the
company said it has completed the initial tests of the hybrid components and a baseline test of the engine. It next plans to test the components and the engine together. The global
aviation industry has set a goal of net-zero emissions by 2050. But technologies such as electric and hydrogen-powered aircraft are still unproven, making decarbonization a
formidable challenge for the industry, which generates about 2% of global emissions. The hybrid engine program is one of several projects GE Aerospace has been pursuing to
develop more fuel efficient technology.
GE Aerospace sees supply constraints persisting next year: A GE Aerospace executive said on Wednesday global supply chains will likely remain challenged even next year,
despite a production slowdown at Boeing. Russel Stokes, head of GE Aerospace's commercial engines and services, said while the company is aligned with Boeing's production rates
for this year, it is working with suppliers to support a ramp up in production in coming years. "I'm confident that over time things are going to get better," he said. "But...it's still a
challenged environment for this year and probably next year." GE Aerospace co-produces the engine for Boeing and Airbus narrow-body jets with France's Safran through their CFM
joint venture, which is the sole supplier to Boeing's 737 MAX family of jets. Boeing's jet production has slowed sharply as regulatory scrutiny has mounted since January when a door Reuters
plug blew off an Alaska Airlines jetliner in mid-air. GE Aerospace has slashed estimates for LEAP jet engine production this year. GE Aerospace CEO Larry Culp has attributed ongoing
supply-chain challenges to the pandemic, which led to a plunge in air travel demand, forcing the aviation industry to lay off thousands of workers. GE Aerospace, which became an
independent company this year, has a dominant share in the engine market for narrowbody jets and enjoys a strong position in widebodies. More than 70% of its commercial
engine revenue comes from parts and services. Stokes said the company's equipment as well as services businesses are grappling with material availability issues.
Leonardo nears deals to grow in cybersecurity, space and drone industries, CEO says: Leonardo is poised to expand in the cybersecurity, space and drone industries through
M&A activity, the head of the Italian defence group said on Wednesday. "We have some due diligence processes under way and we are pretty close to striking deals," CEO Roberto
Cingolani told reporters on the sideline of an event in Milan. "We hope to finalise shortly deals across those three areas," added Cingolani, a minister in the previous Italian Reuters
government. Presenting its 2024-2028 industrial plan in March, Leonardo said it would strengthen its core businesses - helicopters, electronics and aircraft - while investing in
digitalisation and artificial intelligence and leveraging opportunities in cybersecurity and space.
Thales to create joint venture with Ukraine to boost military supplies: France's Thales has signed three deals with Ukraine including one announcing an intention to create a
joint venture in the country that will boost delivery of military gear, the defence company said on Wednesday. The deals were signed under the aegis of France's Ministry of the Reuters
Armed Forces and the Ukrainian Ministry of Strategic Industries, Thales said in a statement. "Domains of cooperation include Electronic Warfare, Tactical Communications, Air

Aerospace & Defence Update | 24 June 2024 3

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Exhibit 2: Global Aerospace and Defence Weekly Newsflow
Major news from the last week in the Global Aerospace & Defence Industry
Weekly newsflow Source
Defence Systems and radars, as well as Unmanned Aircraft Systems," it added. Thales is one of France's leading suppliers of military equipment. France has backed Kyiv in its war
against Russia including through sending military gear. In late May it announced plans to send trainers to the country despite concerns of some allies. Besides the planned joint
venture and another deal to help Ukraine cut repair times of electronic warfare gear, Thales also inked a deal with Ukraine's FRDM aiming to co-develop and manufacture a drone
system capable of releasing munitions.
Aircraft lessor DAE sees China's COMAC breaking Airbus, Boeing duopoly: Chinese state-owned planemaker COMAC has the opportunity to break Airbus and Boeing's duopoly
of the passenger jet market over the next decade, the chief of aircraft leasing company Dubai Aerospace Enterprise (DAE) told Reuters. Airbus and Boeing are the main suppliers of
aircraft to airlines, but the European planemaker is struggling to boost production amid record orders and Boeing is under scrutiny from regulators after a mid-air panel blowout on a
new plane in January. The narrow-body C919 jet, which is manufactured by the Commercial Aircraft Corporation of China (COMAC) and is pitted against Airbus' A320 and Boeing's
737 MAX, is a "perfectly fine aircraft", Firoz Tarapore said in a recent interview. "Over the next decade COMAC has a unique opportunity to break this duopoly into a triopoly because
Reuters
on the one hand Airbus is sold out, and Boeing is having production problems," he said in Dubai this month. COMAC's planes fly almost exclusively within China and with one
Indonesian airline. The planemaker is pursuing certification with Europe's aviation regulator for its C919 jet while also looking for international customers. Aviation industry sources,
however, caution that COMAC is a long way from making inroads internationally, especially without benchmark certifications from the United States or European Union, or more
efficient planes. Tarapore said that the demand for aircraft from China and nearby countries is "extremely robust" and that COMAC has a "a very good chance of making a solid
inroad".
Boeing temporarily shifts some engineers to help focus on commercial planes: Boeing is temporarily shifting some engineers away from its experimental X-66A plane project
to help support commercial development programs and speed up deliveries of existing jets, the planemaker said on Thursday. The X-66A project is an experimental plane being co-
developed by NASA and Boeing that is focused on helping the U.S. achieve its goal of net-zero aviation greenhouse gas emissions. "It is critically important that we meet our
commitment to customers on 737-7, 737-10, 777-9 and 777-8F and on airplane deliveries," Boeing told Reuters in an emailed statement. Boeing is trying to ramp up jet production
Reuters
and meet delivery schedules as it navigates safety concerns after it came under scrutiny following a mid-air incident involving an Alaska Airlines-operated MAX 9 jet. With the X-66A
jet, NASA and Boeing aim to develop a new generation of more sustainable single-aisle aircraft. The jet will feature extra-long, thin wings stabilized by diagonal struts, known as a
"transonic truss-braced wing" concept. Boeing said it had discussed the plan with NASA and the U.S. space agency offered additional personnel to help maintain progress on the X-
66.
Honeywell backs growth drive with $1.9 bln aerospace and defense deal: Honeywell will buy aerospace and defense technology provider CAES Systems for $1.9 billion, the U.S.
manufacturing giant said on Thursday, part of its focus on three broader business trends to drive growth. Since taking charge as chief executive in June 2023, Vimal Kapur has
steered the company toward three "compelling megatrends" - automation, the future of aviation and energy transition. The all-cash transaction with private equity firm Advent
International for CAES is Honeywell's third deal this year. Advent completed its buyout of CAES (then Cobham Advanced Electronic Solutions) for $5 billion in January 2020 and later
Reuters
carved out CAES as a standalone entity in 2021. The CAES deal, which is expected to close in the second half of 2024, will add to Honeywell's adjusted earnings per share in the first
full year of ownership. With the CAES acquisition, the company has deployed just under $10 billion, or about 40% of the targeted amount set in 2023 for M&As and buybacks,
halfway through the targeted timeline of three years, Dray said. The deal will provide additional automated facilities and about 2,200 employees, many of them highly skilled
engineers who could boost the aerospace operations, Honeywell said.

BofA GLOBAL RESEARCH

4 Aerospace & Defence Update | 24 June 2024

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Global A&D Valuations
Exhibit 3: EU Civil & Defence 12mnth fwd. PE rel SXNP (industrials). Exhibit 4: EU Civil & Defence 12mnth fwd. PE rel SXXP (market).
EU Civil is currently trading at 22.8% premium to SXNP, and defence is EU Civil is currently trading at a 59.6% premium to SXXP, and defence is
trading at 16% premium to index (20/06/2024) trading at 50.7% premium to SXXP (20/06/2024)

200% 150%
EU Civil Average EU Civil Average
EU Defence Average EU Defence Average
150%
100%
100%

50% 50%

0%
0%
-50%

-100% -50%
2006 2009 2012 2015 2018 2021 2024 2006 2009 2012 2015 2018 2021 2024

Source: BofA Global Research estimates. EU Defence = Thales and Finmeccanica, BAE, QQ,, Source: BofA Global Research estimates. EU Defence = Thales and Finmeccanica, BAE, QQ,
Rheinmetall, SAAB, Hensoldt, Kongsberg EU civil: Airbus,, MTU, Safran Rheinmetall, SAAB, Hensoldt, Kongsberg EU civil: Airbus,, MTU, Safran
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 5: US Civil & Defence 12mnth fwd. PE rel S&P500 Industrials. Exhibit 6: US Civil & Defence 12mnth fwd. PE rel S&P500.
US Civil is currently trading at a 102% premium to index, and defence is US Civil is currently trading at a 98% premium to index, and defence is
trading at a 10.4% discount (20/06/2024) trading at a 14.9% discount (20/06/2024)

300% 300%
US Civil Average US Civil Average
US Defence Average US Defence Average

200% 200%

100%
100%

0%
0%

-100%
2006 2009 2012 2015 2018 2021 2024 -100%
2006 2009 2012 2015 2018 2021 2024

Source: BofA Global Research estimates Source: BofA Global Research estimates
US Civil: Boeing, CAE, Crane Co, Hexcel,, Triumph Textron. US Defence: General Dynamics, L3, US Civil: Boeing, CAE, Crane Co, Hexcel,,, Triumph Textron. US Defence: General Dynamics, L3,
Lockheed Martin, Moog, Northrop Grumman Lockheed Martin, Moog, Northrop Grumman
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 5

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Where numbers are moving
Sector FY24 EPS over the last month saw 0.3% increase with Civil OE names seeing
0.4% decrease, civil aftermarket names seeing 0.1% increase and defence names seeing
0.6% increase. The major estimate increase was Rolls-Royce (+2.3%) and decrease was
Dassault (-0.5%) during last month.

We will continue to monitor the consensus EPS data on a weekly basis.

Exhibit 7: EPS Revision to- 20th Jun, 2024 Exhibit 8: 12mnth FWD PE to- 20th Jun, 2024
EPS revisions have been overall positive as the re-opening consolidates Civil Aerospace has re-rated as the re-opening has consolidated
and the first positives of increasing defence budgets are felt
1M 3M 6M 1Y
1M 3M 6M 1Y Airbus -7.5% -10.5% -4.4% -2.9%
Airbus -0.4% -1.1% -3.2% -5.3% BAE Systems -0.4% 2.7% 21.7% 23.0%
BAE Systems 0.0% 0.2% -0.1% 4.7% Dassault -12.7% -1.2% -6.0% -14.7%
Dassault -0.5% 0.4% -1.4% 6.4% Hensoldt -11.3% 4.4% 49.9% 15.5%
Hensoldt -0.2% -2.7% -9.9% -13.4% Kongsberg 4.2% 13.3% 55.7% 33.0%
Kongsberg 0.2% 18.4% 23.5% 28.6% Leonardo 2.8% 3.5% 44.7% 77.3%
Leonardo 2.0% 12.6% 11.9% 13.4% MTU -4.2% -0.1% 15.1% -13.5%
MTU 0.1% 0.0% 0.5% 0.1% QinetiQ 15.1% 17.2% 33.3% 6.1%
QinetiQ n.a n.a n.a n.a Rheinmetall -5.8% 4.5% 38.2% 33.1%
Rheinmetall 1.7% 5.4% 8.4% 14.5% Rolls-Royce 10.9% 12.3% 16.1% 18.9%
Rolls-Royce 2.3% 4.7% 22.9% 101.4% SAAB 4.4% 6.5% 40.8% 9.7%
SAAB -0.1% 1.4% 10.4% 24.0% Safran -2.5% -1.8% 5.6% 9.0%
Safran 0.1% 1.1% 5.5% 9.9% Thales -5.3% 7.8% 7.2% 8.2%
Thales 0.2% -0.2% 1.1% -1.1% EU Civil OE -7.5% -10.5% -4.4% -2.9%
EU Civil OE -0.4% -1.1% -3.2% -5.3% EU Civil Aftermarket 1.4% 3.5% 12.3% 4.8%
EU Civil Aftermarket 0.1% 0.5% 3.0% 5.0% EU Defence Average -2.0% 6.4% 35.8% 31.4%
EU Defence Average 0.6% 5.0% 6.5% 10.1% Sector Average -1.9% 3.9% 25.1% 15.3%
EU Sector Average 0.3% 3.2% 4.2% 7.4% Source: DataStream
Source: DataStream BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

6 Aerospace & Defence Update | 24 June 2024

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Global PE Trends
Exhibit 9: EU A&D Sector Valuations -relative 12mnth FWD PE Exhibit 10: US A&D Sector Valuations -relative 12mnth FWD PE
Defence has re-rated since February 2022 US names have not re-rated that much since February 2022 vs EU

3.0

2.4
1.6
EU Civil OE EU Civil
1.8
Aftermarket
US Defence
1.0 1.2 Average

EU Defence US Civil OE
0.6
Average US Civil
Aftermarket
0.4 0.0
2009 2012 2015 2018 2021 2024 2009 2012 2015 2018 2021 2024
Source: DataStream Source: DataStream
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 11: Global Airlines Valuations -relative 12mnth FWD PE Exhibit 12: EU Industrials Sector Valuations -relative 12mnth FWD PE
Airlines have de-rated since 2021 as consensus have been raising numbers European and UK Capital Goods started to re-rate since 2H20
due to air traffic recovery
2.2
4.0 Euro Eng. &
Mach. Avg.
3.0 1.6
Euro Elec.
Asian
Equip. Avg.
2.0 Airlines
1.0
UK Cap
1.0
Goods
European 0.4
0.0 US Airlines
Airlines 2009 2012 2015 2018 2021 2024
2009 2012 2015 2018 2021 2024 Source: DataStream
Source: DataStream BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

Exhibit 13: US Industrials Sector Valuations -relative 12mnth FWD PE

US Industrials started to re-rate since 2H20 and have remained broadly
stable through 2023
2.2 US
Machinery

1.6
US Multi-
Industrials
1.0

0.4
2009 2012 2015 2018 2021 2024
Source: DataStream
BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 7

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Valuations and PE ranges
Exhibit 14: EV/EBIT for 2024 and 2025
2024 (Pan-Euro avg=17.61) and 2025 (Pan Euro avg =14.09) ordered in terms of 2024, most expensive to least
30

EV/EBIT 2024 EV/EBIT 2025

20

10

Source: BofA Global Research estimates

BofA GLOBAL RESEARCH

Exhibit 15: Free Cash Flow Yield % and Dividend Yield %

Free cash flow Pan Euro avg= 4.17% and dividend yield avg =1.41%

15%

10%

5%

0%
FCF Yield 2024E Dividend yield 2024e

-5%

Source: BofA Global Research estimates

BofA GLOBAL RESEARCH

8 Aerospace & Defence Update | 24 June 2024

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Exhibit 16: European A&D Stock-PE Candle light Exhibit
Civil Aerospace companies trade at the top of their historical PE ranges due to air traffic recovery and high visibility on backlogs. Defence trades at peak of ranges due to
high sector average multiples (increasing defence budgets)
600
High PE 05-07, H210-Jun 23 Low PE 05-07, H210-Jun 23 Current PE Avg Q4 08 Pre Euro Crisis June 2011
500

400

300

200

100

Thales
Airbus

BAE Systems

Leonardo
Dassault Aviation

Hensoldt

Kongsberg

SAAB

EUR Avg
QinetiQ

Rheinmetall

Rolls-Royce
MTU

Safran
Source: BofA Global Research estimates
BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 9

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Global book to bill trends
Exhibit 17: Airbus 12mnth Rolling B2B and deliveries Exhibit 18: Boeing 12mnth Rolling B2B and deliveries
Airbus delivered 735 aircraft in 2023 driving a step up in 12m rolling Boeing's Gross B2B and deliveries fell significantly after the 737MAX
deliveries - new orders have improved significantly grounding in 2019
4 1,200 5 900
Airbus Rolling 12 Month Gross B2B Boeing Rolling 12 Month Gross B2B

Airbus Rolling 12 month deliveries (rhs) Boeing Rolling 12 month deliveries (rhs)

3 900
3 600

2 600

2 300
1 300

0 - 0 -
2003 2006 2009 2012 2015 2018 2021 2024 2003 2006 2009 2012 2015 2018 2021 2024

Source: BofA Global Research estimates Source: BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 19: Airbus 12mnth Rolling B2B vs. Air 12mnth fwd PE rel SXXP Exhibit 20: Boeing 12mnth Rolling B2B vs. BA 12mnth fwd PE rel S&P
Airbus trades at a premium vs SXXP due to high backlog visibility and the Boeing's 12M fwd PE multiple trades at a premium vs S&P due to a level of
recovery of air traffic EPS
4 200% 4 1200%
Airbus Rolling 12 Month Gross B2B Boeing Rolling 12 Month Gross B2B
Airbus 12mnth fwd PE rel SXXP Boeing 12mnth fwd PE rel S&P
900%
3 3
100%
600%

2 2

300%
0%
1 1
0%

0 -100% 0 -300%
2003 2006 2009 2012 2015 2018 2021 2024 2003 2006 2009 2012 2015 2018 2021 2024

Source: BofA Global Research estimates Source: BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

10 Aerospace & Defence Update | 24 June 2024

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Air traffic & Capacity
Exhibit 21: Global RPKs and ASKs (%) Exhibit 22: Asia RPKs and ASKs (%) Exhibit 23: Europe RPKs and ASKs (%)
COVID-19 drove global traffic growth to all time Asia-Pacific has increases significantly through Europe started to improve from mid-2021
low levels in 2020 2023 as result of China re-opening onwards

Asia RPKs Europe RPKs

Global RPKs Europe ASKs
9 Asia ASKs 9
Global ASKs 12

6 6
8

3 4 3

0 0 0
2006 2009 2012 2015 2018 2021 2024 2006 2009 2012 2015 2018 2021 2024 2006 2009 2012 2015 2018 2021 2024

Source: IATA Source: IATA Source: IATA

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 24: North America RPKs and ASKs (%) Exhibit 25: South America RPKs and ASKs (%) Exhibit 26: Middle East RPKs and ASKs (%)
NA has higher domestic mix than Europe South America relies heavily on intracontinental Middle East relies heavily on international long-
travel haul traffic through major airport hubs
10
North America RPKs 50
South America RPKs Middle East RPKs
North America ASKs 9
8 Middle East ASKs
South America ASKs
40

6
6 30

4
20
3
2
10

0
2006 2009 2012 2015 2018 2021 2024 0 0
2006 2009 2012 2015 2018 2021 2024 2006 2009 2012 2015 2018 2021 2024
Source: IATA
BofA GLOBAL RESEARCH Source: IATA Source: IATA
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 11

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Relative stock valuations
Exhibit 27: Airbus 12 mnth fwd PE rel SXXP Exhibit 28: BAE 12 mnth fwd PE rel SXXP Exhibit 29: Dassault 12 mnth fwd PE rel SXXP
Airbus has re-rated due to high backlog visibility BAE has re-rated since Feb 2022 due to Dassault has de-rated heavily on business jet
increasing defence budgets market weakness and GTF concerns
160% Airbus 80% BAE 120% Dassault
120%
Systems Aviation
80%
40%
80%
40%
40% 0%
0%
0%
-40% -40%
-40%
-80% -80%
-80%
2004 2009 2014 2019 2024 2004 2009 2014 2019 2024 2004 2009 2014 2019 2024

Source: DataStream Source: DataStream Source: DataStream

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 30: Kongsberg 12 mnth fwd PE rel Exhibit 31: Leonardo 12 mnth fwd PE rel Exhibit 32: MTU 12 mnth fwd PE rel SXXP
SXXP SXXP MTU has de-rated due to GTF concerns
Kongsberg has re-rated since Feb 2022 Leonardo has re-rated significantly since Feb 22
100%
150% 80% MTU
75%

100% 40% 50%

Kongsberg
Leonardo 25%
50% 0%
0%
0% -40% -25%
-50%
-50% -80% 2009 2014 2019 2024
2004 2009 2014 2019 2024 2004 2009 2014 2019 2024
Source: DataStream
Source: DataStream Source: DataStream BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 33: QinetiQ 12 mnth fwd PE rel SXXP Exhibit 34: Rheinmetall 12 mnth fwd PE rel Exhibit 35: Rolls Royce 12 mnth fwd PE rel
QinetiQ is the only defence name that has de- SXXP SXXP
rated since Feb 22 due to concerns around Rheinmetall has re-rated since Feb 2022 due to RR's valuation has re-rated due to strong WB
margins and cap allocation strong growth on Ammo recovery and a turnaround plan
60% 200% 1800%
Rheinmetall Rolls Royce
40% 150% 900%
20% 100%
0%
0% 50%
QinetiQ -900%
-20% 0%
-40% -50% -1800%
-60% -100% -2700%
2009 2014 2019 2024 2004 2009 2014 2019 2024 2004 2009 2014 2019 2024
Source: DataStream Source: DataStream Source: DataStream
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

12 Aerospace & Defence Update | 24 June 2024

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Exhibit 36: SAAB 12 mnth fwd PE rel SXXP Exhibit 37: Safran 12 mnth fwd PE rel Exhibit 38: Thales 12 mnth fwd PE rel SXXP
SAAB has re-rated since Feb 22 due to strong SXXP Thales has re-rated since Feb 2022 due to
growth outlook and Sweden potentially Safran has re-rated since 2020 lows due to increasing defence budgets
entering NATO strong aftermarket growth and overall
50% Thales
narrowbody recovery
150%
125% 25%
SAAB Safran
100%
100%
50% 75% 0%

0% 50%
-25%
25%
-50%
0% -50%
-100% -25% 2004 2009 2014 2019 2024
2004 2009 2014 2019 2024
-50% Source: DataStream
2004 2009 2014 2019 2024 BofA GLOBAL RESEARCH
Source: DataStream
BofA GLOBAL RESEARCH Source: DataStream
BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 13

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A&D EPS Trends
Exhibit 39: Airbus EPS vs Share price Exhibit 40: BAE EPS vs Share price Exhibit 41: Dassault EPS vs Share price
Airbus has faced positive EPS revisions as the BAE EPS expectations have grown reflecting Dassault share price have come down due to
company delivered 735 deliveries in 2023 strong growth on defence budgets lower than anticipated deliveries
8 190 51 1500 16 250
12Mfwd EPS 12M fwd EPS 12M fwd EPS
Share price RHS 170 Share Price RHS 14 Share price RHS
7 1300
200
150 47 12
6 1100
130 10 150
5 110 43 900 8
90 6 100
4 700
70 39 4
50
3 500
50 2
2 30 35 300 0 0
2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024

Source: DataStream Source: DataStream Source: DataStream

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 42: Kongsberg EPS vs Share price Exhibit 43: Leonardo EPS vs Share price Exhibit 44: MTU EPS vs Share price
Kongsberg EPS/share price has been positively Leonardo EPS expectations have increased since GTF concerns weighed on MTU share price
correlated since 2019 2020 lows performance through 3Q23
32 960 2 12M fwd EPS 18 12 12M fwd EPS 300
12M fwd EPS
28 Share Price RHS Share price RHS Share price RHS
800 16
250
24 10
14
640 1.5
20 200
12
16 480 8
10 150
12
320 1
8
8 6
100
160 6
4
0 0 0.5 4 4 50
2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024

Source: DataStream Source: DataStream Source: DataStream

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 45: QinetiQ EPS vs Share price Exhibit 46: Rheinmetall EPS vs Share price Exhibit 47: Rolls Royce EPS vs Share price
QQ EPS growth has been more limited than EU Rheinmetall EPS expectations have increased due Rolls Royce's share price started to improve since
defence peers due to limited margin expansion to strong growth outlook on Ammo late 2022 due to the widebody recovery
25 500 28 140 30 400
12M fwd EPS 12M fwd EPS 12M fwd EPS
Share price RHS 450 24 Share price RHS 120 Share price RHS
25
20
300
400 20 100
20
15 350 16 80
15 200
10 300 12 60
10
250 8 40
100
5
200 4 20 5

0 150 0 0 0 0
2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024

Source: DataStream Source: DataStream Source: DataStream

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

14 Aerospace & Defence Update | 24 June 2024

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Exhibit 48: SAAB EPS vs Share price Exhibit 49: Safran EPS vs Share price Exhibit 50: Thales EPS vs Share price
SAAB has seen EPS upgrades since Feb 22 due to Safran faced strongly positive earnings revisions EPS expectations have increased significantly as
strong growth outlook due to strong aftermarket growth Thales should benefit from increasing defence
budgets, primarily in Europe
10 300 8 170
12M fwd EPS 12M fwd EPS
8 180
Share price RHS 150 12M fwd EPS
Share price RHS 250
8 7 Share price RHS 160
130
200 7 140
6 6 110 120
150
5 90 6 100
4
100
70 80
2 4 5 60
50 50
40
0 0 3 30
2014 2016 2018 2020 2022 2024 2014 2016 2018 2020 2022 2024 4 20
2014 2016 2018 2020 2022 2024
Source: DataStream Source: DataStream
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH Source: DataStream
BofA GLOBAL RESEARCH

Aerospace & Defence Update | 24 June 2024 15

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A&D Compsheet
Exhibit 51: A&D Compsheet
Below we highlight our valuation peer comparison table
Europe EV/EBITDA EV/EBIT PE (x) DY FCF yield
Rating Currency Price Mcap (USD) 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026
Airbus 1 - Buy EUR 149 125,263 11.4 9.8 8.6 15.0 12.6 10.9 22.3 18.1 14.2 1.3% 1.6% 2.0% 3.2% 4.9% 6.5%
Babcock 1 - Buy GBP 539 3,454 6.9 6.1 5.4 10.4 9.1 7.9 14.1 12.3 10.4 0.9% 1.5% 2.0% 3.6% 4.6% 6.4%
BAE Systems 2 - Neutral GBP 1,347 51,846 12.7 11.5 10.7 16.0 14.4 13.2 19.7 17.2 15.3 2.5% 2.8% 3.1% 3.4% 4.4% 6.3%
Dassault Aviation 2 - Neutral EUR 182 15,390 13.7 8.4 6.9 16.5 9.9 8.0 17.3 12.3 10.3 1.8% 2.5% 3.0% 10.8% 7.6% 3.4%
Hensoldt 2 - Neutral EUR 35 4,295 12.6 9.8 8.6 16.7 12.9 11.1 19.0 15.6 12.6 1.6% 2.3% 3.2% 4.1% 6.4% 7.6%
Kongsberg Gruppen 3 - Underperform NOK 874 14,614 21.5 19.5 17.2 27.8 25.1 21.8 33.1 30.0 26.2 0.9% 1.0% 1.1% 2.0% 2.4% 2.8%
Leonardo 1 - Buy EUR 23 14,089 7.1 6.3 5.3 11.9 10.0 7.2 20.8 16.8 13.2 1.2% 1.5% 1.9% 5.8% 6.8% 7.6%
Montana 1 - Buy EUR 19 1,321 8.0 5.9 20.6 11.9 8.2 26.7 14.3 1.1% 2.1% 3.0% 6.2% 8.2% 0.0%
MTU 2 - Neutral EUR 228 12,462 10.3 9.3 8.3 15.3 13.5 11.4 18.8 16.7 14.6 0.9% 0.9% 1.3% 1.0% 1.6% 3.3%
QinetiQ 2 - Neutral GBP 453 3,288 8.7 9.0 8.3 11.2 12.8 11.6 16.8 15.3 13.5 1.8% 2.0% 2.1% 6.3% 5.4% 6.1%
Renk 1 - Buy EUR 27 2,882 14.0 11.4 9.8 16.3 13.4 11.3 24.3 19.3 15.9 2.0% 2.6% 3.0% 3.6% 4.8% 5.9%
Rheinmetall 1 - Buy EUR 496 22,775 13.0 10.1 8.1 18.4 13.3 10.1 20.1 15.4 11.9 1.6% 2.4% 3.2% 2.0% 3.2% 4.7%
Rolls-Royce 1 - Buy GBP 486 51,535 13.4 10.8 9.3 22.8 16.7 12.1 29.1 21.5 16.9 0.3% 1.4% 2.1% 4.7% 5.8% 7.6%
SAAB 1 - Buy SEK 240 12,265 15.8 12.5 10.8 24.9 18.8 14.6 29.7 22.9 19.6 1.1% 1.4% 1.6% 1.9% 2.4% 2.8%
Safran 1 - Buy EUR 203 93,175 16.6 13.7 11.5 21.6 17.5 14.4 28.7 22.0 17.5 1.4% 1.8% 2.3% 3.4% 4.5% 5.6%
Thales 1 - Buy EUR 158 35,178 11.7 10.0 10.2 16.2 13.5 11.7 17.8 14.6 12.7 2.2% 2.7% 3.1% 4.8% 5.1% 0.0%
EU Civil Aftermarket 13.5 11.5 9.9 18.5 15.5 12.9 23.8 19.3 16.1 1.1% 1.3% 1.8% 3.0% 4.0% 5.5%
EU Civil OE 11.4 9.8 8.6 15.0 12.6 10.9 22.3 18.1 14.2 1.3% 1.6% 2.0% 3.2% 4.9% 6.5%
EU Defence 12.4 10.6 9.5 17.0 14.3 12.1 21.5 17.9 15.1 1.6% 2.0% 2.4% 3.7% 4.6% 5.0%
Pan-Euro Average 12.3 10.3 9.3 17.6 14.1 11.6 22.4 17.8 15.0 1.4% 1.9% 2.4% 4.2% 4.9% 4.8%

Non Europe EV/EBITDA EV/EBIT PE (x) DY FCF yield

Rating Currency Price Mcap (USD) 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026
Boeing 2 - Neutral USD 176 108,228 48.8 19.4 13.2 118.0 25.4 15.9 -70.5 58.8 25.9 0.0% 0.0% 0.0% -3.0% 3.9% 5.3%
Embraer 1 - Buy USD 27 4,935 10.1 8.1 6.5 15.8 11.7 9.0 17.8 13.7 11.1 0.0% 0.0% 0.0% 6.7% 8.2% 9.6%
General Dynamics 1 - Buy USD 300 82,208 15.5 14.2 12.8 18.1 16.4 14.7 20.5 18.3 16.2 1.9% 2.1% 2.2% 5.0% 5.7% 6.1%
General Electric 1 - Buy USD 165 180,610 29.6 24.8 21.6 34.8 28.4 24.4 41.8 30.8 25.2 0.6% 0.7% 0.8% 2.9% 3.9% 4.5%
HEICO 1 - Buy USD 226 27,333 31.8 27.3 24.1 38.5 32.9 28.6 65.6 53.9 44.8 0.1% 0.1% 0.1% 1.5% 1.8% 2.5%
Hexcel Corp 3 - Underperform USD 64 5,358 15.1 13.2 11.7 22.2 18.4 15.8 28.7 23.4 19.8 1.0% 1.2% 1.4% 4.1% 4.2% 4.9%
Huntington Ing Industries 3 - Underperform USD 247 9,754 12.6 10.9 9.6 16.7 14.3 12.5 15.3 13.3 11.6 2.1% 2.3% 2.6% 6.8% 7.9% 8.4%
L3Harris 2 - Neutral USD 224 42,507 15.1 13.4 12.0 17.3 15.6 14.1 17.2 15.8 14.2 2.1% 2.2% 2.3% 5.1% 5.8% 6.6%
Lockheed Martin 2 - Neutral USD 466 111,893 13.7 12.6 12.5 14.9 14.5 14.3 17.7 16.1 15.8 2.8% 3.0% 3.2% 5.6% 6.6% 6.4%
Mercury Systems 3 - Underperform USD 27 1,579 141.5 74.0 62.6 61.4 51.3 43.1 133.1 25.3 18.4 0.0% 0.0% 0.0% 1.9% 4.9% 6.5%
Northrop Grumman 1 - Buy USD 434 64,299 13.0 11.8 11.0 17.4 15.7 14.6 17.5 15.8 14.5 1.9% 2.0% 2.2% 3.9% 5.2% 6.4%
Raytheon 2 - Neutral USD 105 139,691 12.2 17.5 17.9 17.5 17.1 19.5 17.1 15.6 2.4% 2.5% 2.7% 4.1% 5.1% 6.0%
Spirit Aerosystems 6 - No Rating USD 32 3,690 7.7 6.3 5.6 12.0 8.8 7.4 16.2 9.6 7.8 0.0% 0.0% 0.0% 5.3% 5.8% 12.5%
Textron 1 - Buy USD 86 16,450 10.5 9.6 8.9 13.8 12.3 11.4 13.8 13.0 11.6 0.1% 0.1% 0.1% 5.9% 7.9% 8.6%
TransDigm Ltd 1 - Buy USD 1,330 74,406 24.4 21.4 20.3 26.5 23.0 21.8 41.0 33.9 30.7 0.0% 0.0% 0.0% 2.2% 2.9% 3.1%
Triumph Group 1 - Buy USD 14 1,084 12.8 12.5 10.7 20.0 16.6 13.8 -156.3 28.1 17.4 0.0% 0.0% 0.0% 4.7% 3.6% 5.6%
US Civil Aftermarket 27.0 23.1 20.9 30.6 25.7 23.1 41.4 32.4 27.9 0.3% 0.4% 0.4% 2.6% 3.4% 3.8%
US Civil OE 20.5 12.1 9.8 41.5 16.2 12.6 -3.0 26.2 16.3 0.3% 0.3% 0.4% 3.1% 5.4% 7.8%
US Defence 12.9 13.2 11.0 16.7 15.5 14.6 17.5 15.6 14.4 2.3% 2.5% 2.7% 5.1% 6.2% 6.8%
US Average 25.9 18.6 16.2 29.1 20.2 17.4 14.9 24.2 18.8 0.9% 1.0% 1.1% 3.9% 5.2% 6.4%
Source: Global Research estimates
BofA GLOBAL RESEARCH

16 Aerospace & Defence Update | 24 June 2024

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Price objective basis & risk
Safran SA (SAFRF; B-1-7; €202.5 / SAFRY; B-1-7; US$54.10)
To derive our €260 (US$69.94/ADR) Safran price objective, we use FCF yield multiples.
Our valuation is based on our 2026-27E average of unhedged FCF estimates with target
multiple of 25x discounted back to 2024, a 15% premium to Safran's 2007-19 average
FCF multiple of 22x (excluding 2009 Global Financial Crisis), which we deem fair given
the improved outlook.

Upside risks to our price objective are 1) USD strengthening against the Euro, 2) China
reopening 3) faster than expected recovery in civil traffic, and 4) improved cost
execution on LEAP

Downside risks to our price objective are 1) the USD weakening against the Euro, 2)
missing FY23 LEAP deliveries guidance 3) poor execution or major product issues with
the Leap engine and transition with the CFM56, as well as changes or new rules on the
long-term accounting practices, and 4) major groundings in the global narrow-body fleet.

Analyst Certification
I, Benjamin Heelan, hereby certify that the views expressed in this research report
accurately reflect my personal views about the subject securities and issuers. I also
certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or view expressed in this research report.

Aerospace & Defence Update | 24 June 2024 17

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EMEA - Capital Goods, Aerospace & Defence Coverage Cluster
Investment rating Company BofA Ticker Bloomberg symbol Analyst
BUY
Accelleron ACLIF ACLN SW Alexander Virgo
Airbus EADSF AIR FP Benjamin Heelan
Airbus Group EADSY EADSY US Benjamin Heelan
Assa Abloy ASAZF ASSAB SS Alexander Virgo
Assa Abloy ASAZY ASAZY US Alexander Virgo
Atlas Copco ATLPF ATCOA SS Benjamin Heelan
Atlas Copco ATLKY ATLKY US Benjamin Heelan
AutoStore XETRF AUTO NO Benjamin Heelan
Babcock International BCKIF BAB LN Carlos Iranzo Peris
Babcock International BCKIY BCKIY US Carlos Iranzo Peris
Daimler Truck DTGHF DTG GY Virginia Montorsi
Daimler Truck DTRUY DTRUY US Virginia Montorsi
DUERR AG DUERF DUE GY Elliott Robinson, CFA
Electrolux ELUXY ELUXY US Alexander Virgo
Electrolux ELRXF ELUXB SS Alexander Virgo
GEA GEAGF G1A GY Alexander Virgo
Hexagon AB HXGBF HEXAB SS Alexander Virgo
Hexagon AB HXGBY HXGBY US Alexander Virgo
Indra Sistemas ISMAF IDR SM Carlos Iranzo Peris
Industrie De Nora XCVJF DNR IM Alexander Virgo
Iveco IVCGF IVG IM Virginia Montorsi
KION Group AG KNNGF KGX GY Benjamin Heelan
Leonardo FINMF LDO IM Virginia Montorsi
Melrose plc MLSPF MRO LN Benjamin Heelan
Metso Corporation OUKPF METSO FH Elliott Robinson, CFA
Montana Aerospace MTASF AERO SW Carlos Iranzo Peris
Nexans NXPRF NEX FP Alexander Virgo
Nordex SE NRDXF NDX1 GY Benjamin Heelan
Prysmian PRYMF PRY IM Alexander Virgo
Renk Group XRGXF R3NK GY Carlos Iranzo Peris
Rexel RXLSF RXL FP Alexander Virgo
Rheinmetall AG RNMBF RHM GY Virginia Montorsi
Rolls Royce RYCEF RR/ LN Benjamin Heelan
Rolls Royce RYCEY RYCEY US Benjamin Heelan
Rotork Plc RTOXF ROR LN Alexander Virgo
SAAB AB SAABF SAABB SS Virginia Montorsi
Safran SAFRY SAFRY US Benjamin Heelan
Safran SA SAFRF SAF FP Benjamin Heelan
Siemens SMAWF SIE GY Alexander Virgo
Siemens SIEGY SIEGY US Alexander Virgo
Siemens Energy AG SMEGF ENR GY Alexander Virgo
SKF SKFRY SKFRY US Benjamin Heelan
SKF SKUFF SKFB SS Benjamin Heelan
Smiths Group SMGKF SMIN LN Alexander Virgo
Smiths Group SMGZY SMGZY US Alexander Virgo
Spirax-Sarco SPXSF SPX LN Alexander Virgo
Thales THLEF HO FP Benjamin Heelan
ViaSat VSAT VSAT US Benjamin Heelan
Weir Group WEIGF WEIR LN Benjamin Heelan
NEUTRAL
ABB ABBNY ABBNY US Alexander Virgo
ABB Ltd. ABLZF ABBN SW Alexander Virgo
Ariston Group XRTRF ARIS IM Alexander Virgo
BAE SYSTEMS BAESF BA/ LN Benjamin Heelan
BAE SYSTEMS BAESY BAESY US Benjamin Heelan
Dassault Aviation DUAVF AM FP Virginia Montorsi
Fluidra SA FLUIF FDR SQ Alexander Virgo
Halma HLMAF HLMA LN Benjamin Heelan
Hensoldt AG HNSDF HAG GY Carlos Iranzo Peris
IMI IMIAF IMI LN Alexander Virgo
Knorr-Bremse AG KNBHF KBX GY Alexander Virgo
Knorr-Bremse AG KNRRY KNRRY US Alexander Virgo
MTU Aero Engines MTUAF MTX GY Benjamin Heelan

18 Aerospace & Defence Update | 24 June 2024

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EMEA - Capital Goods, Aerospace & Defence Coverage Cluster
Investment rating Company BofA Ticker Bloomberg symbol Analyst
QinetiQ QNTQF QQ/ LN Carlos Iranzo Peris
Sandvik SDVKF SAND SS Benjamin Heelan
Sandvik SDVKY SDVKY US Benjamin Heelan
Signify SFFYF LIGHT NA Alexander Virgo
Spectris SEPJF SXS LN Alexander Virgo
Stadler SRAIF SRAIL SW Alexander Virgo
Traton SE TRATF 8TRA GY Virginia Montorsi
Traton SE XTREF 8TRA SS Virginia Montorsi
Vestas VWSYF VWS DC Benjamin Heelan
Vestas VWDRY VWDRY US Benjamin Heelan
YAHSAT XDXBF YAHSAT UH Benjamin Heelan
UNDERPERFORM
Aalberts NV AALBF AALB NA Elliott Robinson, CFA
Alfa Laval ALFVF ALFA SS Alexander Virgo
Alfa Laval ALFVY ALFVY US Alexander Virgo
Bodycote PLC BYPLF BOY LN Benjamin Heelan
Epiroc EPOKY EPOKY US Benjamin Heelan
Epiroc AB EPIAF EPIA SS Benjamin Heelan
Eutelsat EUTLF ETL FP Benjamin Heelan
FLSmidth FLIDF FLS DC Elliott Robinson, CFA
Jungheinrich Pref JGHAF JUN3 GY Benjamin Heelan
Kone OYJ KNYJF KNEBV FH Benjamin Heelan
Kone OYJ KNYJY KNYJY US Benjamin Heelan
Kongsberg Gruppen NSKFF KOG NO Carlos Iranzo Peris
Legrand LGRVF LR FP Alexander Virgo
Legrand LGRDY LGRDY US Alexander Virgo
Nibe Industrier NDRBF NIBEB SS Alexander Virgo
Rational Ag RTLLF RAA GY Alexander Virgo
RS Group EENEF RS1 LN Alexander Virgo
Schindler Group SHLAF SCHP SW Benjamin Heelan
Schneider SBGSF SU FP Alexander Virgo
Schneider SBGSY SBGSY US Alexander Virgo
SES SGBAF SESG FP Benjamin Heelan
Volvo VOLVF VOLVB SS Virginia Montorsi
Volvo VLVLY VLVLY US Virginia Montorsi
Wartsila OYJ WRTBF WRT1V FH Alexander Virgo
RSTR
Alstom AOMFF ALO FP Alexander Virgo
Alstom ALSMY ALSMY US Alexander Virgo

Disclosures
Important Disclosures

Aerospace & Defence Update | 24 June 2024 19

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Safran (SAFRY) Price Chart

The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey
shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of a date no more than one trading day prior to the date of the report.

Safran SA (SAFRF) Price Chart

The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey
shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of a date no more than one trading day prior to the date of the report.

Equity Investment Rating Distribution: Aerospace/Defense Electronics Group (as of 31 Mar 2024)
Coverage Universe Count Percent Inv. Banking Relationships R1 Count Percent
Buy 32 65.31% Buy 25 78.13%
Hold 12 24.49% Hold 10 83.33%
Sell 5 10.20% Sell 4 80.00%
Equity Investment Rating Distribution: Global Group (as of 31 Mar 2024)
Coverage Universe Count Percent Inv. Banking Relationships R1 Count Percent
Buy 1848 53.43% Buy 1067 57.74%
Hold 810 23.42% Hold 468 57.78%
Sell 801 23.16% Sell 370 46.19%
R1
Issuers that were investment banking clients of BofA Securities or one of its affiliates within the past 12 months. For purposes of this Investment Rating Distribution, the coverage universe includes only stocks. A stock
rated Neutral is included as a Hold, and a stock rated Underperform is included as a Sell.

20 Aerospace & Defence Update | 24 June 2024

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FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators
of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of both a stock’s absolute total return
potential as well as its attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). Our investment ratings are: 1 - Buy stocks
are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or
increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. An investment rating
of 6 (No Rating) indicates that a stock is no longer trading on the basis of fundamentals. Analysts assign investment ratings considering, among other things, the 0-
12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock
should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price
appreciation (depreciation).
Investment rating Total return expectation (within 12-month period of date of initial Ratings dispersion guidelines for coverage clusterR2
rating)
Buy ≥ 10% ≤ 70%
Neutral ≥ 0% ≤ 30%
Underperform N/A ≥ 20%
R2
Ratings dispersions may vary from time to time where BofA Global Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.
INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure)
and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector,
region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Global Research report referencing the stock.

Price Charts for the securities referenced in this research report are available on the Price Charts website, or call 1-800-MERRILL to have them mailed.
The issuer is or was, within the last 12 months, an investment banking client of BofAS and/or one or more of its affiliates: Safran.
BofAS or an affiliate has received compensation from the issuer for non-investment banking services or products within the past 12 months: Safran.
The issuer is or was, within the last 12 months, a non-securities business client of BofAS and/or one or more of its affiliates: Safran.
In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale: Safran.
BofAS or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer or an affiliate of the issuer within the next three months: Safran.
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