Growth Engine CSG

ABOUT THE INVESTOR

I am a Western European private value investor with over 30 years of investment experience—experience that came with many “tuition fees.” Over time, however, one learns how, when, and in what to invest.

Successful investing is about knowledge: solid fundamental and technical analysis, a focus on sustainable growth, prudent use of debt, strong competitive moats, insider behavior, dividend reinvestment, and continuous reading and study. Ultimately, it comes down to paying a fair price for a high-quality company.

CSG first came to my attention through its IPO. From that moment on, I began to research the company in depth.

ORGANIZATION AND REVENUE

The main pillars of CSG’s (Czechoslovak Group) business are the defense and security, automotive, and aerospace industries. CSG exports to more than 70 countries, employs approximately 14,000 people and benefits from over 100 years of industrial experience. Over 100 companies are part of the CSG Group.

See also: https://czechoslovakgroup.com/en/companies

CSG operates primarily through two major divisions: Defense Systems, which accounts for approximately 76% of total revenue, and AMMO+, contributing around 24% of revenue. In addition, the group owns several smaller subsidiaries.

Defense Systems is organized into four business units:

• Medium & Large Calibre Ammunition, the largest unit, with 61% of its revenue generated in Europe, of which 34% originates from Ukraine.
• Land Systems, focused on light combat vehicles, the second-largest unit, contributing approximately 13% of total revenue.
• Advanced Systems, which supplies engines and propulsion systems for drones.
• Defense Electronics, specializing in electronic systems for defense applications.

AMMO+

The AMMO+ division focuses on the development, production and sales of small-calibre ammunition for the sport, hunting and security sectors. Approximately 79% of its revenue is generated in the United States.

OWNERSHIP

84.8% of the shares are held by the majority shareholder, the Strnad family (approximately 970 million shares). The remaining 15.2% now being held by institutional and private investors through its recent IPO.

GROWTH

Projected average revenue growth through 2030 is approximately 9%, with an exceptional growth forecast of 26% for 2026.

The company has strong growth potential, driven not only by acquisitions but also by increasing demand for ammunition and combat vehicles. In recent years, CSG has acquired, among others, the Focchi Group and Kinetic Group. The acquisition of Kinetic Group/Remington is intended to serve as a strategic platform for supplying defense and law enforcement agencies.

With European ammunition stocks being depleted, demand has increased further and is expected to remain elevated. European inventories must be replenished. The current order book stands at €14 billion, with an additional pipeline of €18 billion. Target revenue for 2026 is €32 billion.

PROFITABILITY

Defense Systems operates with an estimated profit margin of approximately 29%, while Ammo+ achieves margins of around 8%. Operating profit amounts to €1.84 billion, corresponding to an operating margin of 24.5%.

The projected P/E ratio for 2026 is approximately 36.6. Earnings per share are currently €0.71 and are expected to grow to €0.91.

PAYOUT POLICY

CSG intends to initiate dividend payments in 2027. The expected payout ratio for 2027 is between 30% and 40%. Based on our earnings forecast of €0.91 per share and a payout ratio of 30–40%, the expected dividend would be approximately €0.31 per share, implying a dividend yield of around 1%.

KEY METRICS (2026 ESTIMATES)

• Revenue: €7.5 billion
• Operating profit: €1.84 billion (operating margin 24.6%)
• P/E ratio: 36.6
• Debt/Equity: 3.0
• Debt/EBITDA: 1.3x–1.6x
• Net debt (2025): €3.59 billion

INVESTOR INFORMATION

See: https://ir.czechoslovakgroup.com/en

RATING

I rate CSG as a BUY. I recommend building a position gradually through smaller purchases to average the entry price.