Rafael Advanced Defense Systems Ltd.

The peace agreements between Israel with some countries in the Gulf, including the Emirates, have not yet to transformed into material sales, which we view as a matter of time. Looking into 2022, we expect the company's free cash flow to be slightly negative owing to a high level of capital expenditure (capex) and dividends, and potentially becoming more negative if the company continues with more acquisitions (in 2021 the company spent slightly more than $50 million on acquisitions). Although we view positively the company's growth aspirations, its financial risk profile has become less robust. Compared with the previous base case, we don't include additional acquisitions in 2021 and 2022. The stable outlook reflects our expectation of no material changes

...Rafael Advanced Defense Systems Ltd. is about to close another robust year and is anticipating rewards from some ongoing agreements in 2022 and 2023. After the record high profitability in 2020, the company continued the positive trend in 2021, and the company is expected to post EBITDA of Israeli new shekel (ILS)850 million-ILS900 million (in the first three quarters of the year the company reported EBITDA of ILS500 million). The same level of results, and with some upside, is expected also in the coming years, explained by the company's ILS28.5 billion backlog and limited impact of COVID-19 on its operations. The increase from a level of ILS22.5 billion at the end of 2022, is explained by the shift of focus of several countries from ongoing priorities to dealing with COVID-19. In addition, a relatively stable political situation in Israel, after a few rounds of elections and lack of budget should also lift some uncertainty, and more projects that were waiting for final approval are expected...

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