CSG’s Land Systems Jump 83% and Munitions Output Reaches 800,000 Rounds in Q1, but Hunterbrook Aftermath Weighs on Stock

CSG shares recover 14% in a week after short-seller reports, but remain 45% below peak. Strong Q1 revenue and margin, €17B backlog. Analysts bullish; average price target €32.85.

Three weeks after touching an all-time low of €15.73, Czechoslovak Group’s shares have clawed back 14% in a single week to close at €18.70 on Friday. Yet the stock still trades nearly 45% below its 52-week peak of €33.81, a gap that underscores the damage inflicted by two short-seller reports from Hunterbrook Media — and the market’s lingering unease despite a robust set of first-quarter numbers.

The Prague-based defence contractor posted revenue of €1.544 billion for the three months to March, up 13.8% year-on-year. Operating EBIT came in at €372 million, yielding a margin of 24.1% — squarely within the company’s medium-term target range of 24% to 25%. The group confirmed its full-year outlook for sales of €7.4 billion to €7.6 billion and an unchanged margin.

The headline figure that directly confronts Hunterbrook’s allegations is the ammunition production capacity. CSG said it had the ability to manufacture more than 800,000 rounds of large-calibre ammunition as of the end of March. Hunterbrook’s first report on May 4 accused CSG of generating most of its munitions revenue from the resale of old artillery shells rather than from in-house production, triggering a 13% share plunge and a trading halt. A second report followed on May 18; CSG dismissed both as “selective interpretations of publicly available information” designed to support the short-seller’s own position.

The company’s investment case, however, rests on more than just ammunition. The Land Systems segment — covering armoured vehicles and other ground platforms — posted an 83% jump in sales, far outpacing the 26.5% growth logged by the broader Defence Systems division. Heavy munitions revenue rose 22%, while the Ammo+ unit serving the civilian US market suffered a noticeable decline.

Order intake remains a central pillar of the narrative. The firm order backlog swelled to €17 billion, and the pipeline of projects under negotiation stands at €27 billion, implying a total addressable opportunity of €44 billion. To strengthen its supply chain, CSG entered the Hungarian market via a 49% stake in 4iG Space & Defence Technologies, an investment that indirectly gives it a 37% holding in Rába Automotive Holding. In Greece, a 25-year joint venture has begun producing 155mm shells at Lavrio.

Yet the balance sheet reveals a pressure point. Operating cash flow before tax amounted to just €6 million in the first quarter, while net working capital ballooned to nearly €2.2 billion. Management attributed the build-up to inventory stockpiling ahead of major deliveries and reiterated that working capital should normalise by year-end.

External validation has come from the ratings agencies. Moody’s upgraded CSG’s secured debt to Baa3, and Fitch affirmed a BBB- rating with a stable outlook.

Analyst sentiment remains overwhelmingly positive. Ten analysts recommend buying the stock, none advise selling, and the average price target of €32.85 — with a high of €42 — implies substantial upside from current levels. On a forward price-to-earnings multiple of 16, CSG trades at a discount to the European defence sector average of 23.

The next major test arrives on August 7, when the half-year results are due. By then, the market will know whether the production numbers from Q1 are enough to rebuild investor confidence permanently — or whether Hunterbrook has more ammunition of its own to fire.