Summary 3
I— Rolls-Royce, Thales and EADS rather than Safran,
Finmeccanica and MTU 4
􀁑 Some civil stocks are as interesting as defence players 5
􀁑 Our valuation methods are mainly based on short-term performance
to assess the floor price 11
􀁑 DCF/EVA indicates hope for a medium-term target 14
II— Heading for an inevitable contraction in traffic 15
􀁑 GDP/traffic correlation: heralding an expected slowdown 15
􀁑 We expect world air traffic to contract by 6.8% in 2009E 17
􀁑 Significant capacity cutbacks in 2009E 20
􀁑 Summary of our traffic/fleet scenario 25
III— Correlation between traffic and OEM/aftermarket segments 27
􀁑 A worrying correlation between traffic and OEM 27
􀁑 Correlation between air traffic and aftermarket sales 31
􀁑 Conclusions on correlations 35
IV— Making choices in positioning 37
􀁑 A reminder of sector positioning 37
􀁑 EADS vs. Boeing: a natural choice 39
􀁑 Safran vs. Rolls-Royce: choosing between engine manufacturers 40
􀁑 Thales vs. Finmeccanica: choosing between defence specialists 42
􀁑 Zodiac vs. Goodrich: two profiles with higher exposure 43
V— Impact on production and inventories 45
􀁑 Positioning determines the level of production 45
􀁑 The impact of the slowdown on production management 46
􀁑 The impact on inventories in the value chain 47
VI— Appropriate responses 49
􀁑 The various plans to date 49
VII— Our stock choices 53
􀁑 The financial characteristics of the companies under review 53
􀁑 The reasons behind our stock selection 56
VIII— Company profiles/stock choices 57
􀁑 EADS vs. Boeing 58
􀁑 Rolls-Royce vs. Safran 64
􀁑 Thales vs. Finmeccanica 73