Saab is Sweden’s leading defense conglomerate and a crucial partner to the Swedish Armed Forces and the Swedish Defense Materiel Administration (FMV). In 2023, Saab derived 42% of its revenues from Swedish customers, equivalent to approximately 24% of Sweden’s total defense budget that year.
The company specializes in developing products and systems that enhance critical capabilities across the Air Force (Saab 39 Gripen), Navy (submarines, surface vessels, patrol boats), and Army (anti-tank weapons, air defense systems). Saab also offers essential products like sensors, radar technology, and electronic warfare systems.
With substantial and long-term ownership by the Wallenberg family through Investor (30.1% of capital) and Wallenberg Investments (8.7%), Saab is well-positioned for growth. The current CEO, Micael Johansson, who has been in office since 2019, holds shares worth 57 million SEK in the company.
Saab’s future prospects seem promising, with revenue expected to increase by 15-20% annually over the next few years. Analysts predict a robust growth trajectory for the company, outpacing the anticipated growth in Sweden’s defense budget and that of other major countries.
However, one significant challenge for Saab is the limited domestic market in Sweden for advanced weapon systems like fighter jets and submarines. The company heavily relies on export deals to offset the high development costs of these systems, which can run into billions. Securing more international orders is crucial for sustaining these projects.
Despite these challenges, Saab has seen success in recent years, with potential deals in Thailand and Colombia for its Gripen fighter jets. The Swedish government is also exploring options for a successor to the Gripen by 2030, weighing between a new Swedish-developed fighter, an international collaboration, or purchasing a foreign system.
In terms of valuation, Saab is trading at a premium compared to its peers in the defense industry. However, given the company’s growth potential and strategic position in the market, there is room for further upside in the stock price. As defense budgets continue to rise globally, Saab stands to benefit from increased demand for its products and services.
In conclusion, Saab’s unique position in the defense sector, coupled with the changing geopolitical landscape and escalating security threats, bodes well for its future growth. The company’s focus on innovation and strategic partnerships positions it favorably in the evolving defense market, making it a compelling investment opportunity for investors seeking exposure to the defense industry.