CSG's Caspian Howitzer Plant Takes Shape as Analysts Question Ammunition Margins

CSG plans a second Azerbaijan joint venture for self-propelled howitzers, valued at EUR 1.8 billion, while analysts see margin pressure.

CSG is pressing ahead with a two-track expansion of its artillery business, pairing a fresh manufacturing venture in the Caucasus with an existing supply role in the Baltics. The Czech defence group disclosed on Wednesday that it intends to establish a second joint venture in Azerbaijan, this time aimed at localising production of self-propelled howitzers.

The formal incorporation of the new entity is scheduled for December, with output slated to begin in 2027. CSG values the commercial potential of the initiative at EUR 1.8 billion spread across a multi-year term. Management declined to specify production volumes or identify the local partner, though the project builds on the company's established footprint in the region.

Baltic Contract Anchors Artillery Pipeline

Running alongside the Azerbaijani plans is CSG's role as prime contractor for equipping Latvia's armed forces. That assignment falls to group subsidiary Tatra Defence Systems, which will deliver MORANA artillery systems together with multiple rocket launchers. The company puts the financial scope of the package in the hundreds of millions of euros. Execution relies on an industrial tie-up involving Czech, Slovak and Latvian partners, backed by the European financing instrument SAFE.

Beyond artillery, CSG has also been pursuing acquisitions in North America's technology sector. Neither the parties involved nor the company disclosed the financial parameters or size of that investment.

Valuation Gap Widens as Margin Concerns Mount

Despite a bulging order book, doubts about future profitability are weighing on sentiment. Analysts have set a price target of EUR 13, citing foreseeable pressure on ammunition margins. With Europe currently building out vast capacity for artillery shells, the experts warn that CSG faces a normalisation of margins in its shell business.

Trading has reflected that caution. The stock closed Friday at EUR 14.19, below its 50-day moving average of EUR 17.08. An earlier session saw the shares add 3.5% to EUR 14.69, though they remained beneath the then-prevailing 50-day average of EUR 17.05.

Investors will get a closer look at the group's operating performance and order backlog when third-quarter figures are released in the coming weeks.