I've been investing independently for a few years now - and one of the companies that always impresses me is Safran. Not because it's a hype stock. But because the business model is structurally so good that I want to explain it to anyone who doesn't know it yet.
$SAF (-1,17 %) - The best business model in Europe that hardly anyone knows
Safran builds engines. But that's not how they make money.
The real business runs after that - for decades. Every LEAP engine installed on an Airbus A320neo or Boeing 737 MAX today generates aftermarket revenue over its lifetime via RPFH contracts: Rate Per Flight Hour. Safran receives money every time the aircraft flies. Not once, but for 20-25 years.
The engine is the razor. The aftermarket is the blade.
What the figures say
2025 sales grew to EUR 31.3 billion - an increase of 14.7% compared to the previous year, with record LEAP deliveries and a strong aftermarket. Operating profit increased by 26% to EUR 5.2 billion, the margin expanded by 150 basis points to 16.6%. Free cash flow: EUR 3.9 billion - despite massive investments in new production capacities.
The Propulsion division - the heart of the business - delivers even more: in the first half of 2025, the Propulsion division's operating margin was 23.3%, an increase of 3.4 percentage points.
Why things are only really taking off now
The LEAP is still young. The engines were delivered from 2016 - the first major maintenance cycles are only now beginning. Safran expects LEAP aftermarket sales to more than triple between 2024 and 2028.
1,802 LEAP engines were delivered in 2025 - an increase of 28% compared to 2024. In the fourth quarter alone, the delivery rate increased by 49% compared to the previous year. Each of these engines is a future aftermarket revenue stream that won't really kick in for another 5-8 years.
In the first quarter of 2026, sales grew organically by 23%, with spare parts sales up 29% and services up 43%. LEAP deliveries exceeded 500 units per quarter for the third consecutive quarter.
The 2028 targets
Safran has raised its 2028 EBIT target to EUR 7.0-7.5 billion and plans around 2,600 LEAP deliveries this year Cumulative free cash flow 2024-2028: around EUR 21 billion.
Currency hedging - the underestimated factor
Safran has a net USD exposure of around USD 16 billion per year - almost all aviation contracts are in dollars. 2026, 2027 and 2028 are fully hedged with a target rate of EUR/USD 1.12. This means that currency volatility is largely out of the equation for the next three years. The result can be planned.
The risk
Air traffic volume is the basic assumption. Fewer flights mean less RPFH revenue. Supply chain problems in LEAP production are a known issue - 2024 was a difficult year, 2025 the catch-up. Whether the ramp-up in 2026/27 will run smoothly remains a watch item. And the strong euro remains a long-term structural headwind despite hedging.
Conclusion
Safran is not a cyclical. It is an infrastructure company wrapped up in aircraft engines. The installed LEAP base of now over 10,000 engines worldwide is an annuity stream that is just starting to run. Anyone who understands this also understands why the company exceeds guidance year after year - and why the 2028 targets may still be too cautious.
The share is no bargain. But anyone who values Safran as a classic industrial stock is making the same mistake as someone who values Microsoft by its CD-ROM margin. #stockanalysis
