MilDef: Defence Mode: On

MilDef plays in a structurally growing market, defence budgets are rising across NATO (NATO aims to spend 5% of GDP on security, with 3.5% on defence) and the EU in response to geopolitical instability. Countries are racing to modernise forces and enhance digital capability. MilDef’s ruggedised tech sits at the intersection of this build-up. It has a niche but critical role, with demand increasingly underpinned by national security priorities. Its deep relationships and reputation for delivery position it as a long-term partner in a multi-decade defence cycle.

The company has evolved from a rugged hardware player into a one-stop system integrator offering hardware, software and services. It’s embedded in defence ecosystems from product to platform level. Its systems are certified to operate in the harshest environments, and new facilities in Sweden and the UK give it serious operational scale. The recent decision to open a quadruple integration centre in Rosersberg marks a step-change in its capacity to execute and deliver.

MilDef’s financial profile combines high-growth ambition with margin expansion. Sales grew by a 29% CAGR from 2019–2024 and guidance for 2024–2026 suggests an organic CAGR of 21%. With a new foothold in Central Europe via roda, MilDef is aiming for deeper integration and better cross-selling. It’s executing well on its three-pillar growth strategy, home markets, partnerships and acquisitions, creating a high-leverage setup for both revenue and EBITA expansion.

• Smooth onboarding of roda and early cross-sell wins could affirm synergy thesis and re-rate the stock.

• Q2 and Q3 earnings beats, especially on order intake and margin expansion, could drive upward revisions and sentiment.

• Ramp-up of the Rosersberg integration facility, with visible delivery milestones, may signal readiness for large-scale defence deals.

• Follow-on contract wins in the UK, Nordics or new European markets may validate expansion strategy post-roda.

• Structural defence budget growth in Europe and NATO markets should sustain multi-year visibility.

• Potential for margin expansion above 20% EBITA by 2027 underpins long-term value creation narrative.

MilDef’s rapidly growing backlog (up 55% YoY to over SEK 2.1 billion) requires timely and efficient delivery on increasingly complex defence contracts. These projects often come with strict compliance standards, multi-layered stakeholders, and performance penalties. A failure to execute or delays in fulfilling obligations could impact both near-term earnings and long-term customer trust, particularly as MilDef scales its role in large, integrated systems.

The acquisition of German-based roda is transformative, adding significant revenue and geographic expansion. However, it brings integration risk. Harmonising operations, aligning product strategies, and merging company cultures across borders requires focused execution. If synergies take longer than anticipated or disrupt core operations, it could weigh on margins and distract management from organic growth opportunities.

MilDef’s core markets, Nordics, broader Europe, and NATO-aligned countries—are currently benefitting from increased defence spending. However, this concentration also means the company is vulnerable to political or fiscal shifts. Any moderation in defence budgets, especially if geopolitical tensions de-escalate, could affect demand visibility. The lack of diversification into less cyclical or non-defence sectors amplifies this exposure.