Deutsche Bank Initiates 'Buy' on Kongsberg, Citing Missile Division's 40% Growth Potential

Deutsche Bank has initiated coverage on Norwegian defense contractor Kongsberg Gruppen ASA with a “buy” rating and a price target of NOK 360. The bank's bullish outlook is driven by the company's transformation into a missile-focused defense prime with a growing global footprint and a record order book.

The Bullish Thesis

In a research note, Deutsche Bank analyst Sriram Krishnan highlighted Kongsberg's potential to become one of Europe’s fastest-growing and most profitable defense companies. The analysis points to an all-time-high backlog of NOK 158 billion and a rapid expansion of production capacity as key pillars supporting the company's 2029 revenue target of NOK 100 billion.

The bank also sees potential for margin upside beyond what it described as conservative management targets, suggesting profitability could outperform current expectations.

Growth Drivers by Segment

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Deutsche Bank provided a detailed forecast for Kongsberg's key business areas, with the missile division positioned as the primary growth engine. The bank's projections include:

• Missiles: A compound annual growth rate (CAGR) of approximately 40% through 2030. This growth is expected to be fueled by a 50% increase in cruise missile capacity and the scaling up of its Zone5 low-cost missile line, positioning it to become the largest business within the group.
• Air Defence & Remote Weapon Stations: A projected 30% CAGR for this high-margin segment.
• Discovery Division: Steady growth of about 12% for its underwater and space businesses.

Market Context

The positive initiation comes as defense spending increases globally, creating a favorable environment for contractors with advanced technology and established production capabilities. Kongsberg's significant backlog provides strong revenue visibility for the coming years, underpinning the growth narrative presented by Deutsche Bank.