Turkey’s $37 Billion Defense Firm Says Foreign Orders Doubled

Aselsan, Turkey’s $37B state-run defense contractor, said foreign orders doubled over the past year amid demand tied to the Ukraine and Middle East conflicts. International orders rose to $2.0B last year from $0.5B in 2023 (up $1.5B YoY), and the CEO said recent annual international ordering has been about 2x larger than the prior period. The update suggests improving backlog/visibility for defense spending beneficiaries.

Analysis

The key market signal is not the absolute order number; it is that export demand is broadening beyond a one-theater spike into a more durable procurement cycle. That matters because defense electronics has operating leverage: once engineering, certification, and channel access are in place, incremental export wins can expand margins faster than domestic sales, especially if hard-currency receipts outgrow a locally sourced cost base. For ASELS, the near-term bull case is backlog visibility and plant utilization rather than a sudden revenue inflection.

Second-order, this is a negative for higher-cost Western mid-tier suppliers in radar, EW, and C4ISR where price/performance is now competing against a sanctioned, lower-cost alternative. It also pressures supply chains for precision electronics and semiconductors: if exports keep rising, component lead times and receivables become the hidden risk, and headline orders can outrun cash conversion for several quarters. That is the main thing to monitor before assuming order growth translates into free cash flow.

The contrarian view is that the market may be extrapolating war headlines into a multi-year growth curve too aggressively. If conflict intensity cools or procurement budgets get reprioritized, new orders can slow quickly even while backlog still supports reported sales. What would falsify the thesis is any sign that export orders are being won at the expense of margin, or that backlog conversion slips below expectations over the next 1-2 quarters; in that case the stock rerates from scarcity premium to classic cyclical defense multiple compression.

Key Decisions for Investors

• Long ASELS.IS on pullbacks over the next 1-3 months, but size modestly: the best setup is a backlog/revenue conversion trade, not a headline-chasing momentum trade. Upside is 15-25% if export growth sustains; invalidate if next quarter shows weaker order conversion or margin pressure.
• Use ITA as the liquid basket proxy for the broader defense re-rating over a 6-12 month horizon. This captures the structural defense-spend theme without single-name execution risk; take profits if de-escalation headlines trigger a rapid reversal in defense order commentary.
• Relative-value: long ASELS.IS vs short a premium European defense name or basket such as RHM.DE/SAAB B.ST if accessible, on the thesis that lower-cost Turkish platforms can take share in export markets. Cover if European primes show faster-than-expected order growth or better FCF conversion.
• Set an alert for the next quarterly release: if export orders remain above prior-year levels but operating cash flow does not follow, treat that as a working-capital warning rather than a growth confirmation and fade the move.