CSG’s Margin Squeeze in Munitions Division Fuels 53% Rout Ahead of First Quarterly Test

The Czechoslovak Group (CSG) is posting explosive top-line growth, yet its stock has been cut in half since January. The contradiction stems from a single trouble spot: the Ammo+ segment, which contributed over a fifth of group revenue last year, saw its adjusted operating profit crater by 58% on a comparable basis. Management points to weak commercial demand, rising costs, and new tariffs as the culprits, but the market is demanding proof that the rot has stopped.

CSG’s overall numbers for 2025 were stellar enough to earn a credit upgrade. Revenue surged 71.7% to €6.7 billion, adjusted operating profit hit €1.6 billion, and the margin settled at a respectable 24.1%. Moody’s lifted CSG’s secured senior debt to Baa3 — an investment-grade first for the defence group — while Fitch affirmed its BBB- rating with a stable outlook. The improved ratings should lower future financing costs, yet the stock has ignored the progress, losing roughly 30% in the past 30 days alone. The shares now trade at €15.78, flirting with the year’s low and representing a 53% drop from the all-time high of €33.81 set in January.

Far from sitting still, CSG continues to expand. In April it secured a €250 million contract to supply artillery ammunition to an unnamed European customer. The company is also pursuing a deal to buy nearly half of Austrian mortar specialist Hirtenberger Defence Systems from Hungary’s 4iG group, a move that would broaden its portfolio in mortar systems. Management remains committed to the 2026 guidance: revenue between €7.4 billion and €7.6 billion, with an adjusted EBIT margin of 24% to 25%, and capital expenditure climbing to about 8.5% of sales.

Should investors sell immediately? Or is it worth buying CSG?

But a separate battle with a short seller has eroded trust. Hunterbrook Media, whose affiliated vehicle holds a disclosed short position, disputes the production capacity numbers CSG published in its IPO prospectus. The company claims it can manufacture roughly 630,000 large-calibre rounds annually, about 80% of them 155 mm shells. Hunterbrook, citing the assembly site in Dubnica, Slovakia, estimates actual output at only 100,000 to 280,000 units. CSG has hit back, insisting that internal capacity already reached 630,000 rounds in 2025 without reactivations or third-party partners, and forecasts a further 20% lift in own production this year. A new line in Slovakia, adding 70,000 rounds, supports that ramp, and the medium-term target is 1.1 million rounds across multiple European plants and in India.

Another reputational headache involves the NATO Support and Procurement Agency (NSPA). The agency suspended CSG’s Spanish subsidiary FMG from new tenders on 31 July 2025, a ban that was extended indefinitely in March. A NATO official said the NSPA does not comment on proceedings where contractor fraud or corruption is suspected. CSG dismisses the issue as immaterial, noting that FMG can still sell directly to NATO member states.

Analyst sentiment, meanwhile, remains strikingly bullish. The average 12-month price target is €35.40, with a range from €31.47 to €42. Nine analysts rate the stock a buy; none recommends selling. The yawning gap between that consensus and the current price makes the upcoming first-quarter report on 20 May a critical juncture. For the first time since the IPO, CSG must back up its rhetoric with hard numbers — including the IPO-related costs that only fell due after year-end. To close the discount, the market needs to see concrete evidence that the margin collapse in the ammo division has been contained, that production capacity is genuine, and that the FMG suspension is isolated. Until then, the stock’s slide may have further to run.

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