Huntington Ingalls Industries Stock Analysis 2021

Huntington Ingalls Industries NYSE: HII Recommendation: BUY Samuel Chen and Brian Kelley 1

Executive Summary While defense spending has been limited since 2011 due to the Budget Control Act, sequestration relief provided by the BBA for 2018 and 2019 indicate increased DoD expenditures The shipbuilding subsector is dominated by two main players, and will be driven by the DoD s increased focus on maritime operations Industry Overview Huntington Ingalls dominates 29.2% of the domestic shipbuilding market, and is the largest military shipbuilding company Huntington, originally spun off from Northrop Grumman in 2011, now has has 3 reporting segments Newport News, Ingalls, and Technical Solutions Company Overview Recent market-wide sell offs have depressed trading price, creating an opportunity to invest in HII Variant View: Market has not fully taken into account the impact of escalating tensions with China that will drive defense spending, especially for the US Navy HII is in the best position to be awarded contracts for completing the Force Structure Assessment desired fleet Investment Thesis Base case valuation, with a price target of $268.24, represents a 20.9% upside to current trading price of $221.79(1). Upside case price target of $327.34 47.6% upside Downside case price target of $216.71 2.3% downside Valuation 97% of Huntington's revenue in 2017 was derived from the US government The main manufacturing input is steel and margins may be compressed due to rising prices Midterm elections for Congress may pose a threat to increased military spending approval and appropriation Risks (1) Closing price of 10/24/2018 2

Industry Overview Trends Global Market Share Since 2011 the industry as a whole has seen decreased spending as part of the Budget Control Act of 2011 - $487bn in cuts Midterm elections create an uncertain situation Chinese and Russian surges in spending putting pressure on the US Conflict in the South China Sea in addition to a Pivot to Asia provide a clear driver for US naval expansion Spratly Islands see 3x more shipping traffic than Suez Canal Newly unveiled DoD plans call for 46 new ships over the next 5 years, followed by 30 more over the 25 following years New DoD requested budget is a 14.0% increase over 2018; most of the spending will go towards the Navy and the Air Force Domestic Revenue ($bn) United States Defense Spending ($bn) 800 30.0 700 25.0 600 500 20.0 400 15.0 300 10.0 200 5.0 100 0 0.0 3

Company Overview Business Profile Competitive Advantage Huntington Ingalls Industries is the largest military shipbuilding company, maintaining nuclear and non-nuclear ships for the United States Navy and Coast Guard Huntington is the only company capable of building, refueling, and inactivating nuclear-powered aircraft carriers Sole builders of security cutters for coast guard Business Segments: Ingalls construction of non-nuclear ships Newport News design and construct nuclear-powered ships Technical Solutions provider of life-cycle sustainment services (fleet support, nuclear, oil and gas) 1 of 2 companies that design and build nuclear-powered submarines, the Arleigh Burke class of destroyers, and large deck amphibious assault and expeditionary warfare ships for the U.S. Navy Huntington is well positioned to be awarded future contracts for all of these ships 97% of revenue in 2017 was derived from US government Revenue by Type ($mm) 8,000 Revenue by Segment ($mm) 8,000 952 7,000 7,000 137 691 0 616 0 1,868 1,437 1,355 1,245 1,019 953 6,000 6,000 2,286 2,441 2,188 2,420 2,840 2,389 5,000 5,000 4,000 4,000 3,000 3,000 5,801 5,755 5,712 5,665 5,631 5,573 4,536 4,382 4,298 4,164 4,089 2,000 2,000 3,940 1,000 1,000 0 0 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Newport News Ingalls Technical Services/ Other Product Revenue Service Revenue 4

Annotated Stock Chart Hawkish Pence speech on China policy Index Constituent Add/ Drops USTR is authorized to investigate whether steel / aluminum imports pose a threat to national security Industry-wide EPS miss 10,000,000 $300.00 9,000,000 $250.00 8,000,000 Missed EPS expectations by $0.13 7,000,000 $200.00 Tariff fears and Trump criticism of the Fed cause major selloff 6,000,000 HII awarded $1.43 bn contract 5,000,000 $150.00 US imposes a 25% tariff on all steel imports and a 10% tariff on all aluminum imports Exceeded EPS expectations by $1.75 4,000,000 $100.00 Donald Trump elected President 3,000,000 Exceeded EPS expectations by $1.31 2,000,000 $50.00 1,000,000 0 $- Volume Adj Close Yahoo Finance, Company Filings, Bloomberg 5

Investment Thesis While tensions between the U.S. and China began over an economic battleground, the possibility of armed confrontation over the South China Sea have led the DoD to strengthen resolve in cementing naval dominance. The market has failed to account for this favorable tailwind due to recent market turmoil. This is reflected in this year s National Defense Strategy as well as Washington rhetoric. 1 The Force Structure Assessment, completed in December 2016, calls for an increase of ships to 355, up 26.7% from the 280 in service by 12/31/2017. Newly unveiled plans call for 46 new ships over the course of the next 5 years and being the dominant shipbuilder for the USN, HII is well-positioned to land many of these new contracts. 2 Opportunity for portfolio exposure to Aerospace & Defense Industry, less volatility compared to tech dominated holdings. As a contractor for the US government and backlog based business model, companies in the defense industry are uniquely positioned to obtain steady revenues. 3 6

1. Rising Global Tensions National Defense Strategy, 2018 Spratly Islands The DoD s latest summary on defense strategy marks a tremendous shift from the military downsizing seen over the past decade 4th largest oil reserves in the world, ahead of Kuwait High commercial shipping traffic 25% of the world s crude oil and liquefied natural gas passes through, and in total the area sees 3x more traffic than the Suez canal Focus now lies on inter-state strategic competition rather than terrorism The economic, political, and military strategies of China and Russia are all highlighted as a significant threat to global sovereignty and exchange China utilizes the cabbage strategy to forcefully take islands from other nations with legitimate claims, in addition to dredging sand to create new islands As a result the DoD recommends higher spending to replace aging systems and platforms in order to maintain an operational advantage in all theaters Also an intention to ramp up spending on R&D to gain a competitive advantage in cyber defense, AI / ML, rapid application of commercial breakthroughs US now regularly sails destroyers through the islands as part of Freedom of Navigation Operations, and is often trailed closely by Chinese vessels Geopolitical Developments South China Sea The US is beginning to fund programs designed to combat China s Belt and Road Initiative as well as the Made in China 2025 plan After pulling out of a 2015 nuclear deal with Iran, the Trump administration has reimposed sanctions on Iran Murder of Jamal Khashoggi puts a $110bn arms deal with Saudi Arabia at risk in addition to putting sanctions on the table Russia s annexation of Crimea, financial and military backing of the Donetsk People s Republic, and meddling with democratic elections poses a significant threat to international order Sources: Department of Defense, Wall Street Journal, New York Times, Washington Post 7

2. Force Structure Assessment 2016 USN Objectives Ballistic missile submarines Attack submarines Aircraft carriers Large surface combatants Small surface combatants Amphibious ships Combat logistic force ships Expeditionary Fast Transports Expeditionary Support Base Ships Command and Support Ships 12 66 12 104 52 38 32 10 6 23 Relevant Shipbuilding to Huntington Ingalls Implications Huntington Ingalls is the sole company that provides design, construction, and refueling and complex overhaul (RCOH) services of nuclear aircraft carriers. Responsible for construction of 2 more Gerald R. Ford class carriers 7 more ships contracts likely awarded to HII Huntington is 1 of 2 companies that constructs the surface combatants (destroyers) and nuclear powered submarines Force Structure Assessment 2019 to be conducted in response to the new National Defense Strategy likely to provide upside to USN objectives 46 ships out of all USN objectives expected to be launched within next five years Uncertainty regarding sequestration relief after 2019 indicates much of Huntington s new contracts will be awarded within the next few years and a steady backlog of a revenues Ship Type Existing Ships Ships Remaining Ballistic missile submarines 14 2 Attack submarines 53 13 Aircraft carriers 11 1 Large surface combatants 87 17 Amphibious ships 33 5 8

3. Portfolio Exposure S&P 500 vs Defense Spending, 1947-Present DoD Spending S&P 500 3000 $1,000.00 2500 $800.00 2000 $600.00 1500 $400.00 1000 $200.00 500 0 $0.00 1/1/1947 4/1/1948 7/1/1949 10/1/1950 1/1/1952 4/1/1953 7/1/1954 10/1/1955 1/1/1957 4/1/1958 7/1/1959 10/1/1960 1/1/1962 4/1/1963 7/1/1964 10/1/1965 1/1/1967 4/1/1968 7/1/1969 10/1/1970 1/1/1972 4/1/1973 7/1/1974 10/1/1975 1/1/1977 4/1/1978 7/1/1979 10/1/1980 1/1/1982 4/1/1983 7/1/1984 10/1/1985 1/1/1987 4/1/1988 7/1/1989 10/1/1990 1/1/1992 4/1/1993 7/1/1994 10/1/1995 1/1/1997 4/1/1998 7/1/1999 10/1/2000 1/1/2002 4/1/2003 7/1/2004 10/1/2005 1/1/2007 4/1/2008 7/1/2009 10/1/2010 1/1/2012 4/1/2013 7/1/2014 10/1/2015 1/1/2017 4/1/2018 Diversification Insulation from Recessions TIPS Bonds 5% As it currently stands, 26% of the Investment Club portfolio is in Tech, Media, and Telecom Historically, defense spending hasn t been constrained by stock market recessions if anything, the opposite is true Cash 6% The rollback in spending following the Great Recession was the result of a militarily complacent administration running $1T budget deficits and wasn t in response to the markets per se TMT 26% None of the Club s holdings are in the Aerospace & Defense Sector S&P 500 20% Resultantly, adding HII to the portfolio could add a bonus in terms of diversification Since being spun off of Northrup Grumman, HII has had backlogs in excess of $15bn currently $21.2bn in orders, which could take 3 years to fill in the absence of new contracts C&R 14% IND 4% NR 7% Resultantly, naval contracts position HII very well for recessions FIG 10% HC 8% Source: NDIC 9

Key Risks Key Risks Mitigants Tariff concerns primary raw material is steel 95% of revenue stems from flexibly priced contracts for which HII can be gain additional compensation from clients as work is ongoing to compensate for higher costs of revenue Midterm elections democratic control of the House could spell danger for defense spending Both parties cater to blue-collar workers and a pullback on defense spending could be damaging; could also be tough for democrats to ease off on China after taking a hard stance on Russia for 2 years Concerns over diversification of clients US Navy makes up 89%, Coast Guard 7%, and commercial clients the remainder of revenues Even with a decrease in defense spending, much of the budget must go towards the Air Force and the Navy regardless to replace legacy systems Execution concerns HII has been penalized by the DoD in the past for poor performance A competent management team has found ways to increase revenues in a tough shipbuilding environment 10

Final Recommendation Downside Base Case Upside Case Price Target - $327.34 Upside 47.6% Price Target - $216.71 Downside 2.3% Price Target - $268.24 Upside 20.9% Huntington Ingalls Industries, Inc. (NYSE: HII) is undervalued in the market. The market fails to capture the unique position Huntington is in during these next couple years as the leading military shipbuilder. We recommend a buy. 11

Appendix Q & A 12

Products and Services Product / Service Description Ships America Class (LHA 6) Amphibious Assault Ships Forward presence, scaled-down aircraft carrier Arleigh Burke Class (DDG 51) Destroyers The Navy s primary surface combatant; guided missile destroyer Columbia Class (SSBN 826) Submarines A ballistic missile submarine designed to replace the Ohio Class Gerald R. Ford Class (CVN 78) Aircraft Carriers Brand new class of carriers designed to replace the Enterprise and Nimitz Classes Legend Class National Security Cutters Maritime homeland security cutters for patrolling the coasts San Antonio Class (LPD 17) Amphibious Transport Deck Ships Warships that embark and deploy amphibious land forces Virginia Class (SSN 774) Fast Attack Submarines HII serves as principal subcontractor on the anti-ship and anti-submarine Virginia Class Carrier RCOH Refuel and perform complex overhaul on carriers halfway into their 50-year lifespans. Typically takes around 4 years to complete Services Fleet Support Services Comprehensive lifecycle sustainment services to the USN fleet and commercial customers Integrated Missions Solutions Services High-end information technology and information services and mission-based solutions Naval Nuclear Support Services Design, construction, maintenance, and disposal services for DoD reactors Naval and Environmental Services Management, fabrication, repair, and deactivation of nuclear reactors and laboratories Oil and Gas Services Engineering, procurement, and construction services for pipelines and treatment facilities Decommissioned Enterprise (CVN 65) Defuel and inactivate the world s first nuclear-powered aircraft carrier 13 Source: Company Filings

Operating Model (Base Case) Historical Base Dec-18 Projected Operating Build Product Sales % growth Service revenues % growth Total Revenue % growth Dec-15 $5,655 Dec-16 $5,631 (0.4%) 1,437 6.1% $7,068 Dec-17 $5,573 (1.0%) 1,868 30.0% $7,441 Dec-19 $5,798 2.0% $2,600 16.0% $8,398 6.0% Dec-20 $5,914 2.0% $2,938 13.0% $8,852 5.4% Dec-21 $6,032 2.0% $3,232 10.0% $9,265 4.7% Dec-22 $6,153 2.0% $3,523 9.0% $9,676 4.4% Dec-23 $6,276 2.0% $3,805 8.0% $10,081 4.2% $5,684 2.0% $2,242 20.0% $7,926 6.5% na 1,355 na $7,010 Cost of product sales % margin Cost of service revenues % margin Total COGS (4,319) 76.4% (1,198) 88.4% ($5,517) (4,380) 77.8% (1,228) 85.5% ($5,608) (4,444) 79.7% (1,574) 84.3% ($6,018) (4,548) 80.0% (1,905) 85.0% ($6,453) (4,639) 80.0% (2,210) 85.0% ($6,849) (4,731) 80.0% (2,498) 85.0% ($7,229) (4,826) 80.0% (2,747) 85.0% ($7,573) (4,922) 80.0% (2,995) 85.0% ($7,917) (5,021) 80.0% (3,234) 85.0% ($8,255) Gross Profit Gross Margin $1,493 21.3% $1,460 20.7% $1,423 19.1% $1,473 18.6% $1,550 18.5% $1,624 18.3% $1,691 18.3% $1,759 18.2% $1,826 18.1% Income (loss) from operating investments, net G&A Goodwill Impairment (10) (669) (75) (6) (12) (570) - - - - - - (623) (687) (728) (768) (803) (839) (874) - - - - - - - - EBIT EBIT Margin $739 10.5% $831 11.8% $841 11.3% $786 9.9% $821 9.8% $856 9.7% $888 9.6% $920 9.5% $952 9.4% NOPAT $720 $809 $818 $764 $797 $830 $861 $892 $923 Plus: Depreciation Less: CapEx Less: Increase in NWC 180 (188) 185 (285) 205 (382) 218 (476) (100) 244 (462) (12) 266 (443) (29) 278 (417) (18) 290 (290) (23) 302 (302) (20) Unlevered FCF $407 $567 $624 $704 $870 $903 WACC 8.23% Discount Period Discout Factor Stub 0.09 0.99 0.18 0.68 0.95 1.00 1.68 0.88 1.00 2.68 0.81 1.00 3.68 0.75 1.00 4.68 0.69 1.00 Discount Unlevered FCF $74 $537 $546 $570 $650 $624 14

Operating Model (Upside Case) Historical Base Dec-18 Projected Operating Build Product Sales % growth Service revenues % growth Total Revenue % growth Dec-15 $5,655 Dec-16 $5,631 (0.4%) 1,437 6.1% $7,068 Dec-17 $5,573 (1.0%) 1,868 30.0% $7,441 Dec-19 $5,912 3.0% $2,600 16.0% $8,513 6.7% Dec-20 $6,090 3.0% $2,938 13.0% $9,028 6.1% Dec-21 $6,272 3.0% $3,232 10.0% $9,505 5.3% Dec-22 $6,461 3.0% $3,523 9.0% $9,984 5.0% Dec-23 $6,654 3.0% $3,805 8.0% $10,459 4.8% $5,740 3.0% $2,242 20.0% $7,982 7.3% na 1,355 na $7,010 Cost of product sales % margin Cost of service revenues % margin Total COGS (4,319) 76.4% (1,198) 88.4% ($5,517) (4,380) 77.8% (1,228) 85.5% ($5,608) (4,444) 79.7% (1,574) 84.3% ($6,018) (4,592) 80.0% (1,793) 80.0% ($6,385) (4,730) 80.0% (2,080) 80.0% ($6,810) (4,872) 80.0% (2,351) 80.0% ($7,222) (5,018) 80.0% (2,586) 80.0% ($7,604) (5,169) 80.0% (2,818) 80.0% ($7,987) (5,324) 80.0% (3,044) 80.0% ($8,367) Gross Profit Gross Margin $1,493 21.3% $1,460 20.7% $1,423 19.1% $1,596 20.0% $1,703 20.0% $1,806 20.0% $1,901 20.0% $1,997 20.0% $2,092 20.0% Income (loss) from operating investments, net G&A Goodwill Impairment (10) (669) (75) (6) (12) (570) - - - - - - (623) (692) (738) (783) (824) (866) (907) - - - - - - - - EBIT EBIT Margin $739 10.5% $831 11.8% $841 11.3% $904 11.3% $964 11.3% $1,023 11.3% $1,077 11.3% $1,131 11.3% $1,185 11.3% NOPAT $720 $809 $818 $879 $936 $992 $1,044 $1,097 $1,149 Plus: Depreciation Less: CapEx Less: Increase in NWC 180 (188) 185 (285) 205 (382) 219 (479) (120) 247 (468) (19) 271 (451) (35) 285 (428) (24) 300 (300) (29) 314 (314) (26) Unlevered FCF $500 $696 $776 $878 $1,068 $1,123 WACC 8.23% Discount Period Discout Factor Stub 0.09 0.99 0.18 0.68 0.95 1.00 1.68 0.88 1.00 2.68 0.81 1.00 3.68 0.75 1.00 4.68 0.69 1.00 Discount Unlevered FCF $91 $660 $679 $710 $798 $775 15

Operating Model (Downside Case) Historical Base Dec-18 Projected Operating Build Product Sales % growth Service revenues % growth Total Revenue % growth Dec-15 $5,655 Dec-16 $5,631 (0.4%) 1,437 6.1% $7,068 Dec-17 $5,573 (1.0%) 1,868 30.0% $7,441 Dec-19 $5,685 1.0% $2,229 8.5% $7,914 3.0% Dec-20 $5,742 1.0% $2,386 7.0% $8,127 2.7% Dec-21 $5,799 1.0% $2,529 6.0% $8,328 2.5% Dec-22 $5,857 1.0% $2,655 5.0% $8,512 2.2% Dec-23 $5,916 1.0% $2,788 5.0% $8,704 2.2% $5,629 1.0% $2,055 10.0% $7,684 3.3% na 1,355 na $7,010 Cost of product sales % margin Cost of service revenues % margin Total COGS (4,319) 76.4% (1,198) 88.4% ($5,517) (4,380) 77.8% (1,228) 85.5% ($5,608) (4,444) 79.7% (1,574) 84.3% ($6,018) (4,503) 80.0% (1,644) 80.0% ($6,147) (4,548) 80.0% (1,784) 80.0% ($6,332) (4,593) 80.0% (1,908) 80.0% ($6,502) (4,639) 80.0% (2,023) 80.0% ($6,662) (4,686) 80.0% (2,124) 80.0% ($6,810) (4,733) 80.0% (2,230) 80.0% ($6,963) Gross Profit Gross Margin $1,493 21.3% $1,460 20.7% $1,423 19.1% $1,537 20.0% $1,583 20.0% $1,625 20.0% $1,666 20.0% $1,702 20.0% $1,741 20.0% Income (loss) from operating investments, net G&A Goodwill Impairment (10) (669) (75) (6) (12) (570) - - - - - - (623) (768) (791) (813) (833) (851) (870) - - - - - - - - EBIT EBIT Margin $739 10.5% $831 11.8% $841 11.3% $768 10.0% $791 10.0% $813 10.0% $833 10.0% $851 10.0% $870 10.0% NOPAT $720 $809 $818 $747 $768 $788 $808 $826 $844 Plus: Depreciation Less: CapEx Less: Increase in NWC 180 (188) 185 (285) 205 (382) 211 (461) (103) 230 (435) (2) 244 (406) (18) 250 (375) (8) 255 (255) (12) 261 (261) (10) Unlevered FCF $395 $561 $608 $674 $814 $834 WACC 8.23% Discount Period Discout Factor Stub 0.09 0.99 0.18 0.68 0.95 1.00 1.68 0.88 1.00 2.68 0.81 1.00 3.68 0.75 1.00 4.68 0.69 1.00 Discount Unlevered FCF $72 $531 $532 $545 $608 $576 16

Operating Assumptions Operating Assumptions Product Revenue Active Case Base Upside Downside Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 (0.4%) (1.0%) 3.0% 2.0% 3.0% 1.0% 3.0% 2.0% 3.0% 1.0% 3.0% 2.0% 3.0% 1.0% 3.0% 2.0% 3.0% 1.0% 3.0% 2.0% 3.0% 1.0% 3.0% 2.0% 3.0% 1.0% Service Revenue Growth Active Case Base Upside Downside 6.1% 30.0% 20.0% 20.0% 20.0% 10.0% 16.0% 16.0% 16.0% 8.5% 13.0% 13.0% 13.0% 7.0% 10.0% 10.0% 10.0% 6.0% 9.0% 9.0% 9.0% 5.0% 8.0% 8.0% 8.0% 5.0% Cost of product sales margin Active Case Base Upside Downside 76.4% 77.8% 79.7% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% Cost of service sales margin Active Case Base Upside Downside 88.4% 85.5% 84.3% 80.0% 85.0% 80.0% 80.0% 80.0% 85.0% 80.0% 80.0% 80.0% 85.0% 80.0% 80.0% 80.0% 85.0% 80.0% 80.0% 80.0% 85.0% 80.0% 80.0% 80.0% 85.0% 80.0% 80.0% G&A as a % of total sales Active Case Base Upside Downside 9.5% 8.8% 7.7% 8.7% 8.7% 8.7% 10.0% 8.7% 8.7% 8.7% 10.0% 8.7% 8.7% 8.7% 10.0% 8.7% 8.7% 8.7% 10.0% 8.7% 8.7% 8.7% 10.0% 8.7% 8.7% 8.7% 10.0% Tax Rate Active Case Base Upside Downside 36.1% 26.9% 38.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% Depreciation Active Case Base Upside Downside 2.6% 2.6% 2.8% 2.8% 2.8% 2.8% 2.8% 2.9% 2.9% 2.9% 2.9% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Capital Expenditures Active Case Base Upside Downside 2.7% 4.0% 5.1% 6.0% 6.0% 6.0% 6.0% 5.5% 5.5% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 17

Working Capital Build (Base) Operating Working Capital Build Current Operating Assets Accounts Receivable Inventory Prepaid Expenses Total Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 1,074 285 31 1,390 1,164 210 48 1,422 1,188 183 123 1,494 1,265 219 131 1,615 1,341 220 139 1,700 1,413 239 146 1,799 1,479 247 153 1,879 1,545 260 160 1,965 1,609 270 167 2,046 Current Operating Liabilities Accounts Payable Accrued compensation Current portion of postretirment plan liabilities 317 215 143 316 241 147 375 245 139 402 258 129 427 274 137 450 289 145 472 303 151 493 317 158 514 330 165 Current portion of worker's compensation liabilites Deferred Revenue Other Current Liabilities Total 227 125 247 217 166 256 250 146 236 258 129 236 274 137 236 289 145 236 303 151 236 317 158 236 330 165 236 1,274 1,343 1,391 1,412 1,485 1,554 1,617 1,679 1,741 Net Operating Working Capital Change in NWC 116 79 103 24 203 100 215 12 245 29 263 18 285 23 305 20 (37) Operating Working Capital Assumptions Current Operating Assets A/R Days Inventory Days Prepaid expenses (as % of days) Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 56 19 60 14 58 11 58 12 58 12 58 12 58 12 58 12 58 12 0.4% 0.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% Current Operating Liabilities A/P Days Accrued Compensation (% of COGs) Current portion of postretirment plan liabilities 21 21 23 23 23 23 23 23 23 3.9% 2.6% 4.3% 2.6% 4.1% 2.3% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% Current portion of worker's compensation liabilites Deferred Revenue 4.1% 1.8% 3.9% 2.3% 4.2% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 18

Working Capital Build (Upside) Operating Working Capital Build Current Operating Assets Accounts Receivable Inventory Prepaid Expenses Total Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 1,074 285 31 1,390 1,164 210 48 1,422 1,188 183 123 1,494 1,274 217 132 1,623 1,359 219 141 1,719 1,441 239 149 1,829 1,517 248 157 1,923 1,594 262 165 2,021 1,670 274 173 2,117 Current Operating Liabilities Accounts Payable Accrued compensation Current portion of postretirment plan liabilities 317 215 143 316 241 147 375 245 139 398 255 128 424 272 136 450 289 144 474 304 152 498 319 160 521 335 167 Current portion of worker's compensation liabilites Deferred Revenue Other Current Liabilities Total 227 125 247 217 166 256 250 146 236 255 128 236 272 136 236 289 144 236 304 152 236 319 160 236 335 167 236 1,274 1,343 1,391 1,400 1,478 1,553 1,622 1,692 1,761 Net Operating Working Capital Change in NWC 116 79 103 24 223 120 241 19 277 35 300 24 329 29 355 26 (37) Operating Working Capital Assumptions Current Operating Assets A/R Days Inventory Days Prepaid expenses (as % of days) Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 56 19 60 14 58 11 58 12 58 12 58 12 58 12 58 12 58 12 0.4% 0.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% Current Operating Liabilities A/P Days Accrued Compensation (% of COGs) Current portion of postretirment plan liabilities 21 21 23 23 23 23 23 23 23 3.9% 2.6% 4.3% 2.6% 4.1% 2.3% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% Current portion of worker's compensation liabilites Deferred Revenue 4.1% 1.8% 3.9% 2.3% 4.2% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 19

Operating Working Capital (Downside) Operating Working Capital Build Current Operating Assets Accounts Receivable Inventory Prepaid Expenses Total Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 1,074 285 31 1,390 1,164 210 48 1,422 1,188 183 123 1,494 1,227 209 127 1,562 1,264 204 131 1,598 1,298 215 134 1,647 1,330 217 138 1,685 1,359 224 141 1,723 1,390 228 144 1,761 Current Operating Liabilities Accounts Payable Accrued compensation Current portion of postretirment plan liabilities 317 215 143 316 241 147 375 245 139 383 246 123 395 253 127 405 260 130 415 266 133 424 272 136 434 279 139 Current portion of worker's compensation liabilites Deferred Revenue Other Current Liabilities Total 227 125 247 217 166 256 250 146 236 246 123 236 253 127 236 260 130 236 266 133 236 272 136 236 279 139 236 1,274 1,343 1,391 1,357 1,390 1,421 1,451 1,478 1,505 Net Operating Working Capital Change in NWC 116 79 103 24 206 103 208 225 18 234 246 12 256 10 (37) 2 8 Operating Working Capital Assumptions Current Operating Assets A/R Days Inventory Days Prepaid expenses (as % of days) Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 56 19 60 14 58 11 58 12 58 12 58 12 58 12 58 12 58 12 0.4% 0.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% Current Operating Liabilities A/P Days Accrued Compensation (% of COGs) Current portion of postretirment plan liabilities 21 21 23 23 23 23 23 23 23 3.9% 2.6% 4.3% 2.6% 4.1% 2.3% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% Current portion of worker's compensation liabilites Deferred Revenue 4.1% 1.8% 3.9% 2.3% 4.2% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% 20

Valuation (base) Enterprise Value Implied Share Price Calculation Cumulative Value of FCF $3,000 Enterprise Value $12,766 Terminal Value Less: Debt (1,281) 2023 EBITDA $1,254 Plus Cash & STI $398 Exit Multiple 11.6x Equity Value $11,883 Terminal Value $14,504 Fully Diluted Shares 44.30 PV of terminal value $9,766 Implied Share Price $268.24 % of EV 76.5% Enterprise Value $12,766 WACC & Exit Multiple 10.6x 11.1x 11.6x 12.1x 12.6x 7.23% $260.48 $270.47 $280.45 $290.43 $300.42 7.73% $254.76 $264.51 $274.26 $284.02 $293.77 8.23% $249.18 $258.71 $268.24 $277.77 $287.31 8.73% $243.75 $253.07 $262.38 $271.70 $281.01 9.23% $238.47 $247.57 $256.67 $265.78 $274.88 21

Valuation (upside) Enterprise Value Implied Share Price Calculation Cumulative Value of FCF $3,714 Enterprise Value $15,384 Terminal Value Less: Debt (1,281) 2023 EBITDA $1,499 Plus Cash & STI $398 Exit Multiple 11.6x Equity Value $14,501 Terminal Value $17,332 Fully Diluted Shares 44.30 PV of terminal value $11,670 Implied Share Price $327.34 % of EV 75.9% Enterprise Value $15,384 WACC & Exit Multiple 10.6x 11.1x 11.6x 12.1x 12.6x 7.23% $318.14 $330.07 $342.00 $353.93 $365.86 7.73% $311.26 $322.91 $334.57 $346.22 $357.88 8.23% $304.56 $315.95 $327.34 $338.72 $350.11 8.73% $298.04 $309.16 $320.29 $331.42 $342.55 9.23% $291.68 $302.56 $313.44 $324.31 $335.19 22

Valuation (Downside) Enterprise Value Implied Share Price Calculation Cumulative Value of FCF $2,865 Enterprise Value $10,483 Terminal Value Less: Debt (1,281) 2023 EBITDA $1,131 Plus Cash & STI $398 Exit Multiple 10.0x Equity Value $9,600 Terminal Value $11,315 Fully Diluted Shares 44.30 PV of terminal value $7,619 Implied Share Price $216.71 % of EV 72.7% Enterprise Value $10,483 WACC & Exit Multiple 8.0x 9.5x 10.0x 11.0x 11.5x 7.23% $190.49 $217.51 $226.52 $244.53 $253.54 7.73% $186.35 $212.75 $221.55 $239.15 $247.95 8.23% $182.32 $208.12 $216.71 $233.91 $242.51 8.73% $178.39 $203.60 $212.01 $228.81 $237.21 9.23% $174.57 $199.21 $207.42 $223.84 $232.06 23

Comps Market Enterprise EV / Revenue EV / EBITDA Price / Earnings Company General Dynamics Corp. Lockheed Martin Corp BAE Systems Arconic, Inc. L3 Technologies Ticker GD LMT BA/LN ARNC LLL Capitalization $52,336 89,920 17,137 9,765 16,640 Value $64,368 103,751 19,080 14,736 19,256 2017A 2.1x 2.0x 1.0x 1.1x 2.0x LTM 1.9x 1.9x 1.1x 1.1x 1.9x 2017A 13.9x 14.7x 7.7x 8.4x 16.7x LTM 13.0x 11.8x 7.9x 8.2x 16.9x 2017A 20.5x 15.8x 10.4x 21.7x 24.7x LTM 18.1x 16.4x 25.4x 17.1x 20.3x Huntington Ingalls Industries HII $9,834 $10,705 1.4x 1.4x 12.2x 12.1x 20.0x 19.9x Low Mean Median High $9,765 37,160 17,137 89,920 $14,736 44,238 19,256 103,751 1.0x 1.7x 2.0x 2.1x 1.1x 1.6x 1.9x 1.9x 7.7x 12.3x 13.9x 16.7x 7.9x 11.6x 11.8x 16.9x 10.4x 18.6x 20.5x 24.7x 16.4x 19.5x 18.1x 25.4x Operating Statistics Revenue Revenue Growth EBITDA EBITDA Margin Company General Dynamics Corp. Lockheed Martin Corp BAE Systems Arconic, Inc. L3 Technologies Ticker GD LMT BA/LN ARNC LLL 2017A $30,973 51,048 18,322 12,960 9,573 LTM $34,092 54,488 17,471 13,525 10,047 '16-'17A 1.3% 8.0% 3.0% 4.6% 3.9% LTM 12.3% 9.6% -5.2% 7.7% 0.5% 2017A $4,618 7,046 2,467 1,748 1,153 LTM $4,967 8,762 2,413 1,797 1,138 2017A 14.9% 13.8% 13.5% 13.5% 12.0% LTM 14.6% 16.1% 13.8% 13.3% 13.4% Huntington Ingalls Industries HII $7,441 $7,753 5.3% 7.9% $881 $882 11.8% 11.4% Low Mean Median High $9,573 24,575 18,322 51,048 $10,047 25,925 17,471 54,488 1.3% 4.2% 3.9% 8.0% (5.2%) 5.0% 7.7% 12.3% $1,153 3,406 2,467 $7,046 $1,138 3,815 2,413 $8,762 12.0% 13.5% 13.5% 14.9% 13.3% 14.2% 13.8% 16.1% 24

WACC WACC Calculation Capital Structure Debt Outstanding Amount Interest rate % of Total Weighted 5.000% 3.483% 7.810% 4.550% Debt-to-Total Capitalization Equity-to-Total Capitalization 11.53% 88.47% Senior Notes due 11/15/2025 Senior Notes due 12/1/2027 MS Economic Development Revenue Bonds due 5/1/2024 Gulf Opportunity Zone Revenue Bonds due 12/1/2028 $600 600 84 21 46.8% 46.8% 6.6% 1.6% 2.3% 1.6% 0.5% 0.1% Cost of Debt Less Unamortized Debt Issuance Costs Total Debt (24) -1.9% 0.0% 4.6% Cost of Debt Tax Rate After-tax Cost of Debt 4.56% 21.00% 3.60% $1,281 Current Share Price Current Shares Outstanding $221.79 44.3 Cost of Equity Equity Value Total Debt Total Equity $9,825.30 $1,281 $9,825.30 Risk-free Rate(1) Market Risk Premium(2) Levered Beta 3.12% 5.00% 1.14 Cost of Equity 8.84% WACC 8.23% 25

Backlog Analysis America Class Amphibious Assault Ships ($mm) America class (LHA 6) amphibious assault ships America LHA-6 Start End Period 09-Jul 14-Oct 5.24 Tripoli LHA-7 Contract Value Annual Recognition 14-Jun $2,380 $526 18-Dec 4.53 $526 Bougainville LHA-8 Contract Value Annual Recognition 18-Oct $3,000 $525 24-Jun 5.71 $111 $525 $525 $525 $525 $525 Total America Class Revenue $636 $525 $525 $525 $525 $525 26

Arleigh Burke Class Destroyers from 2013 Contract ($mm) Arleigh Burke Class (DDG 51) Destoyers 2013 Contract Start End Period Paul Ignatius DDG 117 Contract Value Annual Recognition 15-Oct $703 $281 18-Dec 2.5 $281 Delbert D. Black DDG 199 Contract Value Annual Recognition 17-Sep $703 $281 20-Mar 2.5 $281 $281 $52 Frank E Petersen Jr. DDG 121 Contract Value Annual Recognition 17-Feb $604 $242 19-Aug 2.5 $242 $155 Lenah H. Sutcliffe Higbee DDG 123 Contract Value Annual Recognition 17-Nov $618 $247 20-May 2.5 $247 $247 $91 Jack H. Lucas DDG 125 Contract Value Annual Recognition 18-May $703 $281 20-Nov 2.5 $183 $281 $237 Arleigh Burke Flight III 6 ships Contract Value Annual Recognition Total Arleigh 2013 Contract revenue 18-May $5,105 $903 23-Dec 5.65 $585 $903 $903 $903 $903 $903 $1,819 $1,868 $1,284 $903 $903 $903 27

San Antonio Class, Fleets 1 & 2 ($mm) San Antonio Class 1 Start End Period Fort Lauderdale LPD 28 Contract Value Annual Recognition 17-Oct $1,460 $364 21-Oct 4.01 $364 $364 $364 $364 $77 Richard M. McCool, Jr. LPD 29 Contract Value Annual Recognition Total San Antonio Class 1 Revenue 18-Jul $1,430 $286 23-Jul 5 $119 $286 $286 $286 $286 $166 $483 $650 $650 $650 $363 $166 San Antonio Class 2 Start End Period LPD 30 Contract Value Annual Recognition 19-Jan $1,640 $328 24-Jan 5 $328 $328 $328 $328 $328 LPD 31 Contract Value Annual Recognition 21-Jan $1,400 $280 26-Jan 5 $280 $280 $280 LPD 32 Contract Value Annual Recognition 21-Nov $1,400 $280 26-Nov 5 $23 $280 $280 LPD 33 Contract Value Annual Recognition 22-Sep $1,400 $280 27-Sep 5 $70 $280 Total San Antonio Class 2 Revenue $- $328 $328 $631 $958 $1,168 28

Gerald R. Ford Carrier & RCOH ($mm) Gerald R. Ford Carrier Start End Period John F. Kennedy (CVN 79) Contract Value Annual Recognition 15-Aug $11,350 $1,481 22-Jun 6.86 $1,743 $1,481 $1,481 $1,481 $740 Enterprise (CVN 80) Contract Value Annual Recognition Ford Carrier Revenues 20-Jan $10,783 $1,539 27-Jan 7.01 $1,539 $1,539 $1,539 $1,539 $1,743 $1,481 $3,020 $3,020 $2,279 $1,539 RCOH Revenue George Washington (CVN 73) RCOH Contract Value Annual Recognition 17-Aug $2,800 $700 21-Aug 4.00 $700 $700 $700 $467 John C. Stennis (CVN 74) RCOH Contract Value Annual Recognition 21-Jan $2,730 $683 25-Jan 4.00 $683 $683 $683 $683 Harry S. Truman Contract Value Annual Recognition RCOH Revenues 23-Jun $2,662 $665 27-Jun 4.00 $333 $700 $700 $1,383 $1,149 $683 $1,015 29

Virginia Class (SSN 774) Fast Attack Submarines Blocks 3, 4, 5 Virginia Class (SSN 774) Fast Attack Submarines Block USS Delaware SSN-791 Contract Value to Total Annual Recognition 16-Apr $1,760 $264 19-Aug 3.34 $264 $176 USS Oregon SSN-792 Contract Value to Total Annual Recognition 17-Jul $1,760 $343 20-Jan 2.57 $343 $343 $29 USS Montana SSN-794 Contract Value to HII Annual Recognition 18-May $880 $346 20-Nov 2.55 $216 $346 $317 USS Hyman G. Rickover Contract Value to Total Annual Recognition 18-May $1,760 $344 20-Nov 2.56 $220 $344 $315 Remaining of Block IV Contract Value to HII Annual Recognition 19-Jan $6,160 $1,120 24-Jun 5.50 $1,120 $1,120 $1,120 $1,120 $1,120 Block V Contract Value to HII Annual Recognition Virginia Class (SSN 774) Revenue 20-Jan $9,680 $880 30-Dec 11.01 $880 $1,922 $880 $3,208 $880 $2,661 $880 $2,000 $880 $2,000 $880 $2,000 30

Columbia Class (SSBN 826) Ballistic Missile Submarine Columbia Class (SSBN 826) Ballistic Missile Submarine SSBN 826 Contract to HII Annual Recognition 21-Jan $3,650 $730 5.0 $730 $730 $730 SSBN 827 Contract to HII Annual Recognition 22-Jan $3,000 $600 5.0 $600 $600 SSBN 828 Contract to HII Annual Recognition 23-Jan $3,000 $600 5.0 $600 Columbia Revenue $730 $1,330 $1,930 31