We downgrade Steyr Motors from BUY to HOLD and set a technical PT of € 39 (prev. € 49), in line with Red Cat's cash offer. We continue to see long-term standalone value above the offer price. However, Red Cat intends to initiate a delisting after settlement, subject to the applicable withdrawal and exit-offer requirements. The expected reduction in free float also points to lower trading liquidity. With the offer still subject to completion risk and limited visibility on shareholders' ability to realise the standalone upside, we no longer see a compelling case for new investment.
Key shareholder support strengthens the deal. Regulatory clearance remains a hurdle. Both Steyr boards unanimously recommend acceptance, and B&C's commitment to tender its c. 15% stake provides a solid starting point towards the 50% plus one share threshold. Completion requires clearance from the foreign investment authorities in Austria, Australia, Italy and the UK. The deadline for obtaining these regulatory clearances is 30 June 2027, well beyond the initial acceptance deadline of 18 December 2026. We view the remaining spread to € 39 as compensation for completion risk and an uncertain settlement timetable, limiting its appeal as a reason to buy (eNuW).
We expect Red Cat to accelerate growth in Steyr's marine engine business. Steyr's specialised engines fit Red Cat's expansion into unmanned surface vessels (USVs). Broader defence customer access and closer involvement in platform development should help Steyr secure engine positions on future USV programmes, supported by additional development and production resources. These growth opportunities reinforce our positive view of Steyr's operating potential.
Q3 showed a recovery in adj. earnings. Sales rose 11.2% yoy and 13.4% qoq to € 12.5m as deliveries under the KNDS framework started in September. Gross margin improved by 3.1pp yoy to 46.6%, helping lift adj. EBIT to € 1.4m from € 0.9m in Q3 25 and the corresponding margin to 11.4% (+3.3pp yoy). Reported EBIT fell to € 0.4m from € 0.6m, with adjustments mainly relating to consulting expenses.
We expect a stronger finish to the year. KNDS deliveries and call-offs under the US Navy SEALs tender support the acceleration embedded in our forecasts. Our FY26 estimates remain close to the midpoints of management's confirmed guidance of 15-25% sales growth and an 8-12% EBIT margin. Nonetheless, the delays seen earlier this year leave some uncertainty over the timing of individual project revenues (eNuW).
HOLD (old: BUY), new technical PT of € 39 (old: € 49), based on the takeover offer price, which represents a c. 29% premium to the last Xetra closing price before the announcement.
ISIN: AT0000A3FW25