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Citi Research Analysis & Summary: Paris Air Show Insights

Defense Focus:
The Paris Air Show is expected to draw significant attention due to the proximity of the NATO summit. Defense spending is projected to rise, with potential announcements of new partnerships and acquisition deals, especially trans-Atlantic collaborations to secure technology and manufacturing capacity.

Supply Chain & Rare Earth Minerals:
Investors will focus on rare earth mineral supply chains due to ongoing US-China trade tensions. These minerals are critical for aerospace applications. While current inventory can support the industrial base, unresolved tensions could lead to supply bottlenecks.

Commercial OEs:
Boeing and Airbus are unlikely to require record orders at the show, as backlogs remain substantial. Neither company is expected to unveil a new aircraft. Engine development remains the highlight for future launches.

Aftermarket Debate:
Despite slower growth in demand for new aircraft, the aftermarket (driven by flight hours) is expected to grow faster than global GDP. Airlines may accelerate refurbishment efforts due to backlog reductions and increased MRO activities.

Defense Tech:
Private defense technology companies will receive increased attention due to government support, including contracts and funding. Focus areas include unmanned systems and attritable platforms, influenced by lessons from the Ukraine conflict.

Key Companies & Valuations:

• LOAR: Target price $99 (26.5x EBITDA 2027). Risks include cyclical demand and high debt levels.
• Safran: Target price €275 (22x 2025E EV/EBITDA). Risks include air traffic fluctuations and supply chain disruptions.
• TransDigm: Target price $1,635 (22.5x EV/EBITDA 2026). Risks include global economic and geopolitical volatility.

Disclosures:
Citi Research analysts hold conflicts of interest, with Citi acting as an investment banker for some companies and owning significant positions in others.