CHEMRING provides solutions for the defence, security and safety markets and, in the company's own words, "is engaged in the design, manufacture and sale of energetic material products and decoy countermeasures".
Chemring continued to enjoy strong order momentum throughout 2009 and was our key "buy" within the aerospace and defence sector. Even excluding acquisitions and beneficial foreign currency translation, the company experienced a very healthy level of underlying growth and is clearly benefiting hugely from continuing Nato engagement in Afghanistan.
We believe that Chemring has appealing longer-term prospects, but clearly benefits disproportionately from the demand for military consumables. To some extent, it is speculation as to when the US and UK will withdraw from Afghanistan but we suspect it is likely within the next few years. This presents downside risk for Chemring or likely negative market sentiment towards the shares. The shares have performed extremely well and we recommend taking profits.
The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.
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