RADA Electronic Industries - Raising forecasts and valuation

RADA has issued guidance for 2021, which calls for revenues above $120m (growth of more than 60% year-on-year) and significantly improved profitability. Confidence in the outlook is supported by new order inflows demonstrating RADA's success in obtaining initial orders in major US Army production programs. We are upgrading our 2021 revenue forecasts by 5.6% to $120.2m and our EPS forecasts by 9.5% to 29.6c. The 2020-24 forecast EPS CAGR of 25.4% supports our new DCF valuation of $12 (previously $10). The company also trades at a significant 50% PEG discount to the peer group despite almost double the growth rate.

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