Broker snap: Credit Suisse foresees continued growth at Chemring

5th Sep 2011 12:21

Following Chemring's reassuring interim management statement in August, Credit Suisse has retained its outperform rating on the FTSE 250 defence firm, highlighting "platform[s] for continued growth".The group, which manufactures military decoy flares and mine-detection equipment, is the Swiss broker's "top pick in a subdued defence sector, with a strong position in growth markets."Credit Suisse expects earnings to grow by 17% and 19% in 2011 and 2012, respectively, foreseeing opportunities in Counter-IED (improvised explosive device) export markets, a ground-penetrating radar contract, Fast Jet Countermeasures ramp-up and emerging market Munitions spend."However, the broker thinks that at Chemring's current price, the market is pricing-in a 59% probability of a recession, which would see further cuts in defence budgets and order cancellations."In reality, we feel the recession scenario presented for Chemring is a definite worst-case, if not over-bearish".The target price is cut from 690p to 630p.By 12:21 on Monday, shares were 1.4% down at 530p.BC