Intrinsic Value Latécoère S.A. (LAT.PA)

• Previous Close: €0.02
• Intrinsic Value: €0.09
• Upside potential: +426%

Stock Valuation Context

Business Model And Market Position

Latécoère S.A. operates as a specialized aerospace supplier, focusing on aerostructures and interconnection systems for the global aviation, defense, and space sectors. The company’s core revenue model is driven by long-term contracts with major aircraft manufacturers, supplying critical components such as aircraft doors, fuselage sections, and electrical harnesses. Its product portfolio includes high-precision structural elements and advanced avionics solutions, positioning it as a key player in the aerospace supply chain. Latécoère’s market position is reinforced by its technical expertise, established relationships with OEMs, and a diversified geographic footprint across Europe, the U.S., and Asia. The company operates in a cyclical industry, where demand is closely tied to aircraft production rates and defense spending. Despite competitive pressures from larger aerospace suppliers, Latécoère maintains relevance through niche capabilities in lightweight aerostructures and electrical systems. Its subsidiary status under SCP SKN HOLDING I SAS provides strategic stability, though it also limits standalone financial flexibility. The company’s long history since 1917 lends credibility, but it must continuously innovate to retain its position in a rapidly evolving sector.

Revenue Profitability And Efficiency

Latécoère reported revenue of €705.8 million for the period, reflecting its role as a mid-tier aerospace supplier. However, profitability remains challenged, with a net loss of €61.9 million, underscoring operational inefficiencies or cost pressures. Negative operating cash flow of €16.3 million and capital expenditures of €22.1 million suggest strained liquidity, likely due to working capital demands or reinvestment needs in a capital-intensive industry.

Earnings Power And Capital Efficiency

The company’s diluted EPS of €0.00 aligns with its net loss, indicating weak earnings power. Negative free cash flow (operating cash flow minus capex) highlights capital inefficiency, possibly tied to project timing or restructuring costs. Given its debt load and cyclical end markets, improving capital allocation will be critical to stabilizing earnings.

Balance Sheet And Financial Health

Latécoère’s balance sheet shows €59.8 million in cash against €260.2 million in total debt, signaling moderate leverage but limited liquidity buffers. The absence of dividends aligns with its loss-making position. The aerospace sector’s long cycles may necessitate further balance sheet optimization to manage debt covenants or refinancing risks.

Growth Trends And Dividend Policy

Growth is contingent on aircraft production recovery and defense sector demand, with no near-term dividend policy expected. The company’s revenue scale suggests it is leveraged to industry upturns, but its negative earnings and cash flow trends require reversal to sustain organic growth. Strategic partnerships or niche product expansion could drive future top-line improvements.

Valuation And Market Expectations

With a market cap of €168.8 million, the company trades at a depressed valuation, reflecting its unprofitability and sector headwinds. A beta of 1.115 indicates higher volatility versus the market, typical for aerospace suppliers. Investors likely await clearer signs of margin improvement or contract wins to rerate the stock.

Strategic Advantages And Outlook

Latécoère’s strengths lie in its technical expertise and OEM relationships, but operational turnaround is needed. The outlook hinges on aerospace demand recovery, cost discipline, and potential support from its parent company. Success in niche segments like electrical interconnection systems could differentiate it, but macroeconomic and supply chain risks persist.

Sources

Company filings, Euronext Paris disclosures