Dassault aviation: An Indian Rafale order on the way for Dassault Aviation, the market appreciates

(BFM Bourse) – Indian press reports have reported that the Indian Ministry of Defense has approved an order for 26 Rafale fighter jets. An official announcement may come during Prime Minister Narendra Modi’s visit to France in a few days.

As often, the Dassault Aviation action, according to information and rumours, revolves around the orders of the aircraft manufacturer’s fighter jet, the Rafale.

If necessary this Tuesday, the Dassault Aviation title will take 2.3% to 184.3 euros around 10, after registering a peak of 3.8%. Technology and defense group Thales, whose equipment represents between 20% and 25% of the fighter’s value, gains 1.8%, while Safran, the engine maker of the unit, sells 0.4%.

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According to several Indian media, including the news agency Ani, cited by Reuters, the Indian Defense Minister has given the green light to an order for 26 Rafales for the Indian Navy, as well as three Scorpene submarines.

This operation still needs to be validated by the defense procurement board, a body responsible for procurement, as well as by the government’s cabinet, Ani adds. According to the agency, an official announcement was to come during Indian Prime Minister Narendra Modi’s diplomatic visit to France. The latter is the guest of honor at the celebrations on July 14 and will arrive in France on Thursday and will have dinner on Friday with the President of the Republic, Emmanuel Macron.

BFMBusiness.com had already mentioned last week the possibility that this order for 26 Rafales will be signed during the July 14 celebrations.

Contacted by BFM Bourse, spokespersons for Dassault Aviation were not immediately available to comment.

A decision that would be “logical”

“The press information is positive because it gives credibility to an order for 26 aircraft, which would represent an amount of 4 billion euros and which was not integrated in the analysts’ models”, assesses a financial intermediary. “It would be a very good contract that underlines the visibility that the Rafale can have and reminds us that Dassault Aviation’s stock is undervalued,” he continues.

This new order, if confirmed, will be added to the first “off-the-shelf” (ie aircraft manufactured in France) that had been placed in 2016 by India with the aircraft manufacturer for a total of 36 Rafales.

At the beginning of the year, the CEO of Dassault Aviation, Eric Trappier, explained that it would be a rational decision on the part of the Indian government to choose its aircraft. “It would be quite interesting and logical, because already having Rafales with the Indian Air Force and having the same aircraft by train to the Navy would be wise”, he elaborated.

By the end of 2022, Dassault Aviation’s Rafale order book stood at 164 units, with 39 aircraft for France and 125 for export. The aircraft manufacturer plans to deliver 15 this year, 14 to France and one to Greece.

New orders may enable Dassault Aviation to extend a higher production rate over time, while the group is currently carrying out a tense ramp-up. Like all aircraft manufacturers, Dassault Aviation faces difficulties on its production line.

“The effects of COVID and the shortage issues related to the war in Ukraine have put constraints on many logistics and supply chains, so our supply chain is in difficulty,” stressed Eric Trappier in March. Dassault Aviation plans to increase to a production rate of three Rafales per month.

Other potentially interested countries

In terms of orders, other options may still exist for the Rafale, apparently.

Colombia had pre-selected the fighter for a potential order of 16 examples, but the two parties could not agree before the end of 2022. It is not yet known whether this will be postponed until this year.

Indonesia, it could activate the rest of its order for 42 aircraft, as Dassault Aviation has so far only obtained a first firm contract for six aircraft. Other countries are mentioned by the special press, especially Iraq or Serbia.

Dassault Aviation will announce its half-year results on July 20 after the market closes. The group should then give indications of the state of demand in its other major business, business aviation with its Falcon range. On this point, Morgan Stanley was cautious in a recent note. “After a strong recovery from the pandemic, demand for business jets appears to be weakening as economic risks increase,” the bank wrote.

Julien Marion – ©2023 BFM Bourse

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