Most recently, MTU Aero Engines was able to recover significantly from its low for the year. With discount certificates, investors can also generate positive returns when the upswing comes to a standstill.

After the MTU Aero Engines share fell by 25 percent from EUR 199.45 to EUR 149.20 within the short period from mid-August 2022 to the end of September 2022, it was able to recover significantly. The share reacted – albeit with some delay – with a rise in price to the publication of slightly better than expected sales figures, which were supported by the strong US dollar.

Because of the generally favorable prospects for companies in the civil and military aviation industry, experts in the latest analyzes reiterated their buy and hold recommendations for the share due to the increased annual targets with price targets of up to 275 euros (JP Morgan Chase).

The investment idea

Investors who, based on the good figures, are forecasting a reasonably stable price development for the MTU Aero Engines share, which is considered to be greatly undervalued, but who also want to generate positive returns in the event of a further fall in the share price, could invest in a discount certificate as an alternative to buying shares to be interesting.

Discount certificates enable cheaper entry into the share and reduce the risk of direct share purchases. On the other hand, the return potential of discount certificates is limited in contrast to the unlimited profit potential of equity investments.

The way it works

If, on the certificate’s valuation date, the MTU Aero Engines share is quoted at or above the cap that defines the certificate’s highest payout amount, the discount certificate will be redeemed at the end of its term at its maximum amount of EUR 155.

The key data

The Morgan Stanley discount certificate (ISIN: DE000MD999J6) on MTU Aero Engines shares has a cap of EUR 155. Valuation date is September 15, 2023, the certificate will be redeemed on September 22, 2023. With the MTU Aero Engines share price of EUR 178.00, investors were able to buy the certificate for EUR 141.14. The certificate is therefore 20.71 percent cheaper than the share.

The chance

Since investors can currently buy the certificate for EUR 141.14, it enables a gross return of 9.82 percent (=11.20 percent per year) over the next eleven months if the share price is above the cap of EUR 155 on the valuation date .

The Risks

If the MTU Aero Engines share is quoted below the cap of EUR 155 on the valuation day, the certificate is redeemed at the closing price of the share determined on the valuation day. If the share price is below the purchase price of the certificate on that day, i.e. below EUR 141.14, then the investment will cause a loss.

This article does not constitute a recommendation to buy or sell MTU Aero Engines shares or investment products based on MTU Aero Engines shares. No liability is assumed for the correctness of the data.