Stock Analysis & Valuation Saab AB (publ) (0GWL.L)

• Previous Close: £694.20
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	12.10	-98
Intrinsic value (DCF)	251.73	-64
Graham-Dodd Method	5.70	-99
Graham Formula	19.10	-97

Strategic Investment Analysis

Company Overview

Saab AB (publ) is a leading Swedish aerospace and defense company specializing in advanced military and civil security solutions. Founded in 1937 and headquartered in Stockholm, Saab operates across five key segments: Aeronautics, Dynamics, Surveillance, Kockums, and Combitech. The company is renowned for its cutting-edge military aviation technology, including manned and unmanned aircraft systems, as well as ground combat weapons, missile systems, and underwater vehicles. Saab also provides critical safety and security solutions, such as radar systems, electronic warfare, and C4I (Command, Control, Communications, Computers, and Intelligence) technologies. With a strong focus on innovation, Saab supports defense, public safety, and industrial sectors with cybersecurity, AI, and big data analytics. The company's diversified portfolio and global presence make it a key player in the aerospace and defense industry, catering to both military and civil markets worldwide. Saab's commitment to R&D and strategic partnerships ensures its continued relevance in an evolving security landscape.

Investment Summary

Saab AB presents a compelling investment opportunity due to its strong position in the aerospace and defense sector, backed by a diversified product portfolio and global reach. The company's solid financials, including SEK 63.75 billion in revenue and SEK 4.17 billion in net income for the latest fiscal year, underscore its stability. With a market cap of SEK 218.7 billion and a low beta of 0.052, Saab offers defensive exposure to geopolitical tensions and increased defense spending. However, risks include dependency on government contracts and cyclical defense budgets. The company's robust operating cash flow (SEK 6.73 billion) and manageable debt levels (SEK 10.38 billion) support its dividend yield, currently at SEK 1.8 per share. Investors should monitor geopolitical developments and R&D investments in next-gen defense technologies.

Competitive Analysis

Saab AB competes in the global aerospace and defense market by leveraging its niche expertise in advanced military aviation, underwater systems, and electronic warfare. Unlike larger U.S. defense contractors, Saab focuses on high-margin, specialized solutions, such as the Gripen fighter jet and A26 submarines, which offer cost-effective alternatives to competitors' premium-priced platforms. The company's strength lies in its ability to integrate cutting-edge technology, including AI and cybersecurity, into defense systems, giving it an edge in modern warfare solutions. Saab's partnerships with emerging markets and neutral-country status (Sweden) allow it to bypass export restrictions faced by U.S. firms, expanding its addressable market. However, it faces intense competition from larger players with greater R&D budgets and established supply chains. Saab's agility and innovation-driven approach help it maintain relevance, but scalability remains a challenge compared to industry giants like Lockheed Martin or BAE Systems.

Major Competitors

• BAE Systems plc (BA.L): BAE Systems is a major competitor with a broader global footprint and stronger naval and electronic systems divisions. While Saab excels in cost-effective fighter jets, BAE dominates in large-scale defense projects like the Eurofighter Typhoon. BAE's larger scale provides procurement advantages, but Saab's agility in innovation gives it an edge in niche markets.
• Lockheed Martin Corporation (LMT): Lockheed Martin is the global leader in defense, with superior resources and the F-35 program overshadowing Saab's Gripen. However, Saab's Gripen offers a lower-cost alternative favored by budget-conscious nations. Lockheed's dominance in stealth technology and space systems is unmatched, but Saab's neutrality allows it to access markets restricted to U.S. firms.
• Airbus SE (AIR.PA): Airbus competes with Saab in military aviation and surveillance systems, particularly with its Eurofighter and A400M programs. Airbus benefits from a larger civil aerospace segment, which Saab lacks. However, Saab's focus on defense-specific innovation and smaller, customizable solutions differentiates it from Airbus's broad but less specialized portfolio.
• Raytheon Technologies Corporation (RTX): Raytheon excels in missile systems and radar technologies, directly competing with Saab's Dynamics and Surveillance segments. Raytheon's scale and U.S. government contracts give it an advantage, but Saab's expertise in cost-efficient, modular systems appeals to non-aligned nations. Raytheon's cybersecurity division also overlaps with Saab's Combitech segment.
• Thales Group (THALES): Thales competes closely with Saab in electronic warfare, C4I, and naval systems. Thales has a stronger presence in European defense contracts, but Saab's submarine technology (via Kockums) is a unique differentiator. Thales' broader civil aerospace exposure contrasts with Saab's defense-centric model.