Our Eur209 target price is based on a DCF-derived fair value, based on a 21% EBITA CAGR 2024-29e, followed by 2% profit growth out to 2031 and 3% long-term, 9% WACC, and 96% long-term operating cash conversion. In deriving our equity value from our EV, we adjust for net debt, pension underfunding (post tax), and refundable government aid. The 21% EBITA growth and implied 2024e EV/EBITA fair value of 28.8x are due to the relatively cyclically low 2024 profit base and high growth thereafter.

The key negative risks to our investment thesis on Airbus are: (1) a societal change to air travel, driven by the fallout of the COVID-19 pandemic; (2) high degree of uncertainty of near-/medium-term aircraft deliveries; (3) increase in demand for vendor financing, worsening cash flows, if credit markets tighten or continued export credit agency support is not forthcoming; (4) appreciation of the euro vs US$; and (5) the complex nature of the business, making it difficult to model and hard to value, with recurring/non-recurring items making estimating the underlying profitability of the business tricky.

If any of these risk factors has a greater impact than we anticipate, the share price will likely have difficulty attaining our target price. Conversely, if the impact of any of these risks is less significant than we anticipate, the stock could exceed our target price.