Bidder validation, delayed conversion; chg.

Withdrawn Red Cat approach underlines USV as a core growth market. Steyr Motors had attracted a preliminary, non-binding takeover approach from US drone and robotics group Red Cat Holdings. Red Cat has since withdrawn its proposal and states that it has no active proposal outstanding. A leak of the plans or disagreement over terms could be behind this, though neither side has given a reason. There are two takeaways, in our view: First, a US platform player saw enough strategic value in Steyr Motors to move towards a full takeover, which speaks to the company's standing as a mission-critical and hard to displace supplier, where owning the asset would create a clear USP for the acquirer. Second, the USV market confirms itself as a core growth market for Steyr Motors, given that this is precisely the domain Red Cat is scaling into.

Red Cat has the balance sheet for a renewed approach. The US drone manufacturer trades at a market cap slightly above USD 1bn on LTM revenue of USD 55m as of Q1 26, reflecting triple digit organic growth and leaving it with highly rated paper as well as cash of c. USD 300-400m following a recent capital increase (eNuW). Against a current market value for Steyr Motors of c. € 200m, a deal is financially within reach. We regard the industrial logic as sound, hence takeover speculation should remain a support for the shares.

At the same time, Steyr Motors near-term visibility, however, remains limited. While the order backlog stands at € >300m on a long-term view, only € 37m are still scheduled for 2026. While this was known earlier this year already, there is still no news on orders for locomotives, the K2 main battle tank or any further USVs. Following soft Q1 sales, this lack of announcements warrants caution, in our view. We read the pattern as postponement, with orders potentially still landing during the course of this year, albeit late enough to leave little room to convert them into 2026 revenues. We consequently reduce our estimates below guidance, with a disproportionate effect on profitability given the operating leverage in the model (eNuW).

Beyond 2026, the less visible parts of the pipeline carry the case. Urovesa appears to have won a five year Spanish MoD contract for 1,000 vehicles from January 2027, offered on Steyr engines. Meanwhile the Austrian MoD is tendering 800 vehicles over four years with two Steyr customers in the final round. Both look likely to result in orders for Steyr Motors. Beyond the 500 APU frame contract, KNDS carries a further c. € 70m near-term opportunity. Red Cat's Blue Ops division alone targets production of over 1,000 USVs in 2027 (source: WorkBoat), with Steyr Motors the sole named engine supplier on the V7, currently the only available model. The M12 power unit further supports the upside potential, with prototype requests from several MoDs and tier one OEMs for drone charging and directed energy applications.

Against a weaker 2026 phasing and an intact medium-term ramp, we reiterate BUY with a new PT of € 53 (old: € 60), based on DCF.