This analysis was originally published as a stock note by MorningStar Equity Research.
What we think about Rheinmetall AG’s revenue
Wide Must Rheinmetall rhm The reported group backlog is up 56% year-on-year to 62.6 billion euros, supported by new nominations of 11 billion euros. Management confirmed that the framework contracts of around 55 billion euros (mainly from Germany) have been actively converted into corporate contracts, providing more than four years of visibility. Revenues rose 46% year-on-year to 23.1 billion euros, almost entirely due to organic defense growth, but the defence margin reached a first-quarter record of 11.5%.
We maintain our fair value estimates while acknowledging the risk of rising from accelerated policy momentum. In a recent discussion with NATO executive director-general candidate Mark Latte, Rhinemetal CEO showed that European defence spending could reach 3.5% of GDP by 2029 ahead of the 2032 assumption. Management also sees the possibility of capturing a long-term market share of 30%, versus the current 23% forecast.
The vehicle system has nearly doubled annual revenues to 952 million euros each year, driven by tracked tactical vehicle delivery and early contributions from US LOC performance. Impending contract conversions are expected in Italy (Panther), Romania (Lynx) and Germany (Pumalot 2). Weapons and ammunition recorded sales of 599 million euros and a margin of 19.3%.
Electronic solutions were up 50% year-on-year, driven by Skynex, Skyranger and Digitisation Orders from Germany and Taiwan. The margin was temporarily diluted by the ramp-up cost of the F-35.
Rheinmetall forms JVs with Lockheed Martin
Additionally, Rheinmetall formed a 60%-owned joint venture with Lockheed Martin LMT Establishes a sovereign European production base for precision guided tactical missile systems and deals with US supply lead times of over 10 years. A fully-production lamp is expected by 2029, with annual revenue potential of up to 5 billion euros.
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