US President Donald Trump’s impassioned speech to troops at Fort Myer military base in Arlington Virginia on 21 August is potentially encouraging for investors in munitions manufacturer Chemring (CHG).

His promise to ensure his troops ‘have every weapon to apply swift, decisive and overwhelming force’ could boost demand for the company’s products.

Sanjay Jha, analyst at Panmure Gordon, says: ‘Chemring should be the biggest beneficiary from a protracted war in Afghanistan and Pakistan involving increasing numbers of troops.’

Chemring’s offering

A ‘short cycle war’, as Jha dubs the US’s new strategy in Afghanistan, should play to Chemring’s strengths. Its countermeasures, improvised explosive device defences and pyrotechnics fit well with this style of warfare.

The company also produces some highly effective munitions including 40mm grenades as well as mortar shells which are suitable for land-based warfare.

The company’s chief executive Michael Flowers took over three years ago and the company has recovered from a period of multiple profit warnings. Jha says under the new management the company has been reducing its reliance on short cycle product.

But the countermeasures and energetic systems divisions still accounted for almost 80% of group sales last year and Jha says that a drawn out conflict ‘could lead to a sudden boost in volumes and margins’.

Jha gives Chemring a target price of 216p, implying 22% upside at the current price of 177p.

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