Defence companies should continue to see restocking demand from Western armies even though the outcome of the Ukraine war remains hard to predict, according to Citibank.
Restocking will proceed irrespective of when and how the conflict ends, says the US bank, but it cautions that investor sentiment on this issue is likely to impact the sector near-term.
BAE Systems, the UK’s main arms supplier, in particular, has been buoyed by the need for new munitions to meet the demands of the war.
Shares reached a new five-year high of 1,028p today following the leaked US intelligence reports of a Ukraine counteroffensive in the offing.
BAE is one of the main shell manufacturers for the UK/NATO and stockpiles have been used up as Ukrainian troops at one point reportedly were firing up to 10,000 artillery rounds daily.
Having only recently hit 1,000p for the first time, shares in BAE rose 2p today, electronic warfare specialist Qinetiq was up 1.1% at 344.8p and naval dockyard owner Babcock was flat at 297p.