Defense and aviation demand propel Israeli jet engine company to nearly $1B valuation
Defense and aviation demand propel Israeli jet engine company to nearly $1B valuation
Beit Shemesh Engines posts 65% growth in its engine sector as the global market nears $1 trillion.
The positive momentum experienced by defense companies following the wars in Israel and Ukraine has not gone unnoticed by Beit Shemesh Engines, which increased its third-quarter sales by 27% compared to the same period last year, reaching $67.7 million.
Beit Shemesh Engines, controlled by Ishay Davidi’s FIMI fund (25%), specializes in the production and overhaul of engines—a relatively niche field in the defense industry compared to companies that develop high-profile products garnering significant media attention. Despite its low profile, the company’s stock, traded on the Tel Aviv Stock Exchange, has soared by 212% over the past year, reaching a market value of NIS 3.2 billion—an increase of approximately NIS 1 billion since August.
The company’s core business, which accounts for 65% of its revenue, involves producing jet engine parts. This includes forging discs and rings, casting blades, and machining critical components for propulsion systems. In the third quarter, this segment generated over $42 million in revenue—an 11% increase compared to the same period last year.
The improvement in this sector is attributed to the continued recovery in the civil aviation market, reflected in rising global demand for passenger aircraft and engines. This trend is expected to sustain high activity levels across the global aviation industry, benefiting Beit Shemesh Engines. Increased airline passenger numbers are driving demand for new aircraft and their accompanying jet engines.
Beit Shemesh Engines is involved in engine programs for Boeing 737 Max and other Boeing aircraft, various Airbus models, CH-53K military transport helicopters from Sikorsky, and F-35 aircraft from Lockheed Martin. Its main customers include Pratt & Whitney, Siemens, Mitsubishi, and others.
The engine sector, responsible for jet engine development, production, maintenance, and assembly, experienced the most significant growth. Its revenues increased by 65% in the third quarter, totaling more than $27 million. Customers in this segment include the Israeli Air Force and other military forces worldwide. The sector also develops small jet engines for cruise missiles—a market expected to grow significantly.
Global military aviation market activity, valued at $570 billion in 2023, is projected to nearly double to over $975 billion by 2033. Geopolitical events, including the Russia-Ukraine war, Israel's ongoing conflict, and tensions between China and the U.S., are driving increased defense budgets across the IDF, the U.S. military, NATO, and Asian countries.
Beit Shemesh Engines’ strong third-quarter performance drove its gross profit margin up from 17% in Q3 2022 to 26.1% in the current quarter. Net profit more than doubled, reaching $10.5 million.
CEO Ram Drori attributed the strong results to increased procurement by Israel’s Ministry of Defense, which reflects a broader strategy to reduce reliance on foreign suppliers. Drori noted the historical significance of Beit Shemesh Engines, founded during the French arms embargo of the late 1960s to reduce Israel’s dependency on foreign-made jet engines.
“Today, we see growing political involvement in procurement decisions by various countries. While this poses challenges, we are continually finding solutions to deliver our products without disruption,” Drori said.
To strengthen its position in the U.S. market, Beit Shemesh Engines recently acquired an 80% stake in Ohio-based Turbine Standard for $33.3 million. The acquisition will enhance its access to American tenders and provide synergies with its existing engine activities. “This acquisition is part of our broader strategy to expand capabilities and better serve the American market,” Drori said.
FIMI’s successful investment
FIMI’s investment in Beit Shemesh Engines has been highly profitable. Acquired in 2016 for NIS 200 million at a company valuation of less than NIS 400 million, the fund has since sold shares and received dividends totaling NIS 348 million. The value of its remaining 25% stake is now NIS 831.5 million, reflecting an 860% increase in stock value since acquisition. FIMI’s total profit from its investment currently stands at NIS 909.5 million.
