London’s biennial Defence and Security Equipment International show has always been a place for big kit and bigger promises.
This year’s event, by Berenberg’s count, drew more than 60,000 attendees, almost double the 2023 edition. The mood reflected a simple reality: NATO is moving towards spending 3.5% of GDP on defence by 2035.
That shift implies an 8% annual growth rate in budgets across Europe and Canada.
For UK-listed groups, that backdrop is proving powerful. Babcock International PLC (LSE:BAB), long seen as a laggard, is emerging as one of Berenberg’s favoured picks.
The company is bidding, alongside Finland’s Patria, to supply the UK with up to 1,500 armoured 6x6 vehicles. These would be built at Devonport in Plymouth.
A separate tender for as many as 400 mortar systems could be worth £400 million.
Both would lift its land segment, while the steady expansion of Britain’s submarine fleet promises decades of support work across Devonport, Rosyth and the Clyde.
On Berenberg’s numbers, the shares trade at 19 times 2026 earnings, with an 11% growth rate, and merit a 1,360p price target.
BAE Systems PLC (LSE:BA.) made its usual splash, fielding the biggest stand and unveiling the Herne, an autonomous submarine it hopes to bring to market in 2026. Management suggested Typhoon fighter output could more than double to 30 a year within two and a half years.
That would be helped by likely orders from Turkey and Saudi Arabia. Even so, Berenberg keeps a “hold” stance.
The broker argues the stock already discounts much of the growth, with a target of 1,850p against a market price nearer 1,950p.
Chemring Group (LSE:CHG), another UK name, showcased a new electromagnetic warfare system, EM-Vis Deceive, designed to jam drones and communications.
Alongside its countermeasures and missile energetics, it is also chasing a large follow-on contract under Project Zodiac, potentially worth more than £100 million.
Berenberg highlights further growth options in energetics from sites in Scotland, Norway and Germany. The broker is a buyer, setting a 670p target versus a 565p price.
QinetiQ Group PLC (LSE:QQ.) offered a taste of the future with its DragonFire laser weapon system.
The product is now due to be deployed on Royal Navy Type 45 destroyers in 2027, years earlier than planned.
Its targets business, supplying aerial drones for training, is also gaining traction with the US Air Force. The biggest near-term swing factor is a $600–700 million bid to supply Poland with aerostats for aerial surveillance.
A win would cement its Global Solutions division as a growth engine. Berenberg is positive, with a 570p target compared with a 503p market price.
The UK defence sector as a whole has risen 60% this year. That lags continental peers but is still well ahead of the wider market.
Berenberg argues that record backlogs and rising budgets justify premium valuations.