CSG N.V.: Czech Defense Play With 50%+ Upside on Backlog, 9% Yield
CSG N.V. raised FY25 revenue guidance to €3.5B after H1 revenue doubled to €1.8B. The Czech defense group's order backlog hit €8.8B, covering 2.5 years of production at current capacity. ADR yield roughly 9%.
Czech defense and engineering conglomerate CSG N.V. (OTCMKTS:CSGVY) reported a 75% jump in first-half revenue to €1.8 billion, driven by its ammunition and vehicle divisions. The company raised its 2025 revenue guidance to €3.5 billion from a previous €3 billion, and said its order backlog now stands at €8.8 billion, giving roughly 2.5 years of full-capacity production visibility.
CSG's earnings before interest, taxes, depreciation and amortisation rose 60% to €385 million, with margins holding at 21.4%. Free cash flow came in at €353 million, up from €273 million in the same period last year. The company declared an interim dividend of €1.40 per share, representing a roughly 9% annualised yield at current ADR prices.
The backlog growth comes as European Union governments accelerate procurement under the €800 billion ReArm Europe plan announced in March. CSG is a direct beneficiary: it supplies large-calibre ammunition to Ukraine and several NATO members, and its Tatra vehicle division produces military trucks for the Czech and Slovak armies. The Czech government approved a €1.2 billion ammunition framework contract with CSG in June, the company said, covering deliveries through 2028.
CSG's largest shareholder is billionaire Michal Strnad, who controls roughly 80% of shares. The stock trades at about 10 times forward earnings on the Prague Stock Exchange, a discount to western peers like Rheinmetall and BAE Systems, which trade around 15-18 times. The ADR structure for U.S. investors carries a 15% Czech withholding tax on dividends, which may be partially reclaimable under the U.S.-Czech tax treaty.
Production capacity is the main constraint. CSG is building a new ammunition factory in Policka, eastern Czech Republic, scheduled to begin output in 2026. Until then, the company said it is running existing plants at near 100% utilisation, and any further order acceleration would require subcontracting or longer lead times.
Risks include a potential ceasefire or peace deal in Ukraine that reduces ammunition demand, though NATO stockpile rebuilding is expected to continue for years regardless. Currency exposure is moderate: most revenue is in euros and dollars, while costs are partly in Czech koruna. The stock fell 8% in August after a broader rotation out of defence names, but has recovered most of those losses.
The next catalyst is the Q3 report in November, which will show whether the production ramp keeps pace with the order intake. CSG is also expected to pursue bolt-on acquisitions, particularly in drone systems and electronic warfare, to complement its existing ammunition and vehicle portfolio.
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