Deutsche Lufthansa: Encouraging Sign On The MRO Division

2025-01-24 13:48:27 ET

Summary

• With more evidence on the Technik division, we see support for a €10 billion segment by 2030.
• Better financial comps on 2024 results (due to strikes) and no additional M&A will support Lufthansa's core business.
• With a lagging valuation and an ongoing deleverage path, Deutsche Lufthansa is a buy.

Following our updated travel industry analysis, which favored Expedia and International Airlines Group (IAG), we are back to comment on Deutsche Lufthansa AG ( OTCQX:DLAKF , OTCQX:DLAKY ). Compared to IAG and Expedia, the German airline operator's shares finished 2024 down 20% and 12% in December. As a reminder, we have a supportive buy rating backed by 1) Airflight production capacity constraints and flag carrier mergers support the company's long-term upside, 2) a new turnaround program with limited strikes ahead, 3) a deleveraging path with a discounted valuation compared to pre-covid level. Since our last publication, the company reported its Q3 update, but more importantly, it released its Lufthansa Technik Capital Market Day . The company 's core operating profit mainly comes from airline transportation; however, 30% is related to the Technik business, the largest MRO worldwide (Fig 1). ...

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