Will Merz get a blank check today? Germany votes today on the debt brake regarding defense investments. Rheinmetall’s stock price has already risen sharply in half a year. At least Kauppalehti has reported that Volkswagen’s vacated factories would in the future churn out armored vehicles. I have not previously invested in the arms industry, but now I joined in with a small sum. Does anyone have previous experience investing in arms companies? At least in terms of rhetoric, Europe intends to invest increasing sums of money in defense going forward.
More discussion about the defense industry here. If you want a separate thread about Rheinmetall, you should put a bit more effort into the opening post and tell potential readers about the company and its key figures. 
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I made this quickly. I did it in just under three quarters of an hour (I had it approved by Ituhippi )
Rheinmetall – Europe’s Rising Defense Industry Player
Rheinmetall is one of Europe’s most significant defense industry companies and has benefited significantly from increased defense appropriations. In 2024, Rheinmetall reported a turnover of 9.75 billion euros, which is 36 percent more than the previous year. Additionally, the company’s operating profit rose by 61 percent to 1.48 billion euros. This year and in the coming years, spending will be more aggressive due to the worsening global situation, which is why Europe, in particular, has begun to rearm.
Rheinmetall is known especially as a manufacturer of cannons, armored vehicles, ammunition, and anti-aircraft systems. The company has approximately 31,000 employees (December 2024), and its products are widely used around the world. For example, the main gun of the Leopard 2 main battle tank is manufactured by Rheinmetall, as are the artillery systems of the UK’s Challenger 2 and the USA’s M1 Abrams, etc.
Russia’s invasion of Ukraine has led many European countries to increase their defense spending, and Germany, in particular, has evidently committed to massive rearmament. This will likely also be reflected in Rheinmetall’s order books in the coming years. Bureaucracy and complex procurement processes slow down implementation, but it is nevertheless expected that progress will now be made at a faster pace than before.
New Production to Meet Growing Demand
Rheinmetall plans to convert two of its automotive factories in Berlin and Neuss for defense industry use. These would be developed into hybrid factories, where automotive production would also partially be maintained. The goal is to meet the growing demand for military supplies and strengthen production capacity.
Opportunities and Risks for Investors
Rheinmetall’s stock has risen significantly since the Russian invasion, and the growth prospects of the defense sector support the company’s long-term development. However, it is good to remember that the company’s business is heavily dependent on government decisions and defense budgets, which can change according to political cycles, and it is not always certain what will be allocated where and on what timeline. Generally, the cyclical nature of the defense industry and long delivery times can pose challenges.
Key Figures
P/E ratio 86.4x
ROA-% 6.2 %
EV/EBITDA 35.0x
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It might be visible by the end of the week in Rheinmetall’s stock price and other defense-related stocks and products.
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Rheinmetall is an interesting entity. Are there any views here on how big this can all turn out to be? Will it in any case be a surprise what kind of ‘ketchup bottle’ explodes, or will it be so-called steady growth? The figures in this thread are already realized growth. How much more aggressive growth is even physically possible, given that factory investments are needed? Views?
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Rheinmetall is indeed an interesting player in this day and age. I’m not currently interested in direct investment in such a large and popular company, but I am interested in following what happens, as some good investment opportunities might be found among the company’s smaller subcontractors. So, a small tangent, but it should fit this thread.
Ceotronics AG is one I have invested in myself. It currently makes, among other things, headset microphones integrated into soldiers’ helmets for Rheinmetall.
Now that Rheinmetall is getting big contracts, left and right, I need to dig a bit to see which listed companies could be significant suppliers. This news mentions a relatively new contract worth 3.1 billion euros, and that there are over 30 subcontractors involved.
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“Rheinmetall shares surge after preliminary first-quarter sales beat estimates”
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Steep growth at Rheinmetall in the first quarter 2025 operatingresult in defence business almost doubled
Rheinmetall posts 73% surge in Q1 sales, driven by defense demand, civil weakness
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On Friday, JPMorgan updated its financial outlook on Rheinmetall significantly raising the price target to €2,100 from the previous €1,400 while maintaining an Overweight rating on the stock
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Finnish satellite company Iceye and German defense giant Rheinmetall are planning to establish a joint venture.
The purpose of the companies is to manufacture satellites and other space technology solutions as part of Rheinmetall’s space-focused operations in Germany.
The joint venture, named Rheinmetall Iceye Space Solutions, will start in the second quarter of 2026 and will focus on the production of SAR satellites at Rheinmetall’s Neuss facility.
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Here’s SalkunRakentaja’s article about Rheinmetall; for those who have followed the company more closely, it might not be much new, but it’s still a good article for those who have followed it less.
Subheadings:
- Europe arms itself, Rheinmetall benefits
- Strong growth drivers underlying
- Risks associated with supply chain management
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Bloomberg: Germany Prepares Tank Deal Worth Up to 25 Billion Euros
Germany is getting ready to buy. Thousands of armored vehicles are being acquired, Bloomberg reports.
Armored power.
Germany plans to acquire a thousand new Leopard 2 main battle tanks for new NATO brigades, Bloomberg reports. The image shows a Greek Leopard 2A6 tank in a military exercise in North Macedonia in May 2025. Forces from seven NATO countries participated in the exercise.
PHOTO: epa12146911
Today 14:55
Updated today 14:57
Germany is considering buying up to 2,500 armored combat vehicles and a thousand main battle tanks, news agency Bloomberg reports.
The project could be worth up to 25 billion euros, although the final price may also decrease as negotiations progress.
The new equipment is intended to create new brigades for NATO to strengthen deterrence. NATO has requested up to seven brigades from Germany over the next ten years. The size of one brigade is approximately 3,000–5,000 soldiers.
Commercial cooperation
Alavus
Entrepreneurs say: This is why it’s worth operating in Alavus
The acquired tanks would be Leopard 2 models and the armored vehicles GTK Boxer models. Defense companies Rheinmetall and KNDS would be jointly responsible for the manufacture of the tanks.
KNDS is a German-French company, Rheinmetall is German.
The manufacture of armored vehicles, in turn, would be handled by Artec, jointly owned by KNDS and Rheinmetall.
The orders are expected to be finalized in the coming months, and legislative approval for the deal is anticipated by the end of the year. The German Ministry of Defense did not comment on the matter to Bloomberg.
However, at NATO’s June summit, Germany pledged to increase the number of its brigades as part of growing defense spending. Previously, German Chancellor Friedrich Merz stated that Germany wants its army to be Europe’s strongest army in terms of conventional weapons.
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When will this come back down to earth?
Pe100 “at the workshop”. Even if the defense boom continued for 10 years, can it still be a good acquisition at these prices.. I somewhat doubt it. Surely the industry is already so competitive that there’s no room for growth even in margins.
Or are there any bulls who would disagree?
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The article below tells, among other things, how Rheinmetall opened a giant factory in Northern Germany, which will become Europe’s largest ammunition manufacturer.
CEO Armin Papperger said that Europe must urgently catch up to Russia’s production levels, because Russia produces up to 5 million artillery shells per year, while Europe produces only about 2 million.
NATO leader Mark Rutte praised the swift action and called for more similar projects in tanks and air defense as well.
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Inderes’ initiation of SAAB coverage made me think again about Rheinmetall, which in some way encapsulates the renaissance of the European defense sector. In fact, before the war in Ukraine, there probably weren’t even Europe-specific defense ETFs, whereas several have appeared recently.
Rheinmetall’s market capitalization is now 90 billion euros, with revenue around ten billion. So P/S 9x.
The order backlog is around 60 billion and it grew +30% year-on-year in Q2’25.
As everyone knows, the stock is priced for Europe’s new level of defense investments because Rheinmetall, which manufactures numerous weapon systems, is a sure winner when ammunition, armored vehicles, etc., are needed.
If we assume that in a mature phase, Rheinmetall would trade at a P/E of 15x calculated using the VEHI method, the current earnings level should be 6 billion. If the company can achieve a 10% net margin, then revenue should swell to 60 billion euros (6x the current).
However, the company’s best margins (>20%) come from ammunition production, at least some of which, to my understanding, goes to Ukraine. The rest of the business typically yields a “10%” operating profit margin for defense equipment manufacturers. Currently, there are still bottlenecks in ammunition production in Europe, but once stockpiles are full sometime in the 2030s, what will be the normal level of orders? And what about the level of profitability? Public finances are tight, so why pay so much that Rheinmetall always gets 20% margins on its ammunition? The war in Ukraine is unlikely to end in the coming years. Wars start suddenly, usually last much longer than expected, but then they also end suddenly. Even though Europe needs to have the capacity to produce more ammunition than Russia, there is a maximum level for stockpiles.
With this simple reflection, Rheinmetall would thus appear to be a somewhat expensive stock. On the other hand, if one believes the war in Ukraine will escalate into a hot NATO vs. Russia conflict in the coming years, or that Ukraine will fall unexpectedly and Russia will immediately continue into Poland and the Baltics, then demand for Rheinmetall’s products can be said to remain strong.
Note: Rheinmetall is also not a capital-light software company whose operations simply scale nicely with growth without investments. The company’s investments grew by over +50% in H1’25 vs. H1’24, and free cash flow is firmly in the red.
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Thanks to Verneri.
Apparently, somewhere it is believed that Rheinmetall’s earnings growth is sustainable. In my opinion, that target price of €2,200 should be taken with a grain of salt, whether the war in Europe continues or not..
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Continuing this discussion about Rheinmetall…
Bloomberg had an article about the company’s ability to achieve and maintain +20% operating profit margins.
The company’s €50 billion revenue target by 2030 is probably not impossible, but in that case, the company would make €10 billion in operating profit.
The most profitable division is ammunition production, where the company manages the entire value chain itself and robots work autonomously: the operating profit margin for this division is as high as 30%!
Will politicians accept such margins? After all, the company produces goods for the public sector, with taxpayers’ money.
Secondly, if and when peace eventually comes to Ukraine, with large production volumes, a situation will eventually be reached where inventories are of a satisfactory size. What is the “normal” demand for ammunition?
The company is also investing in the naval sector, where margins have historically been weak.
Overall, the margins of defense industry companies are more like 10% than 20%.
Competitors are also investing in production, chasing the big profits.
Although the stock has fallen recently, it doesn’t look cheap yet.
The market capitalization is still €70 billion. EV/S 2025e 5.5x.
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Although the stock price has come down 18% in 6 months, its P/E ratio is still well over 100. The probable end of the war in Ukraine will lead to a new situation where this company moves into risk cases. What the world looked like in spring 2025 may not necessarily lead to a major arms race in indebted, aging Europe that would continue until the 2030s.
The EU now produces only 7% of the world’s steel, China 53.5%, USA 3.7%. The shoulders on which EU countries intend to push up their arms and ammunition production are very narrow.
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If one looks at the P/E ratios 26E and 27E (36.4x and 24.5x), these are not impossible either. Quite normal for a fast-growing company.
Then, regarding a possible peace, I personally see that if peace comes, it will likely be a bad deal for Ukraine and Europe. It means that Russia will rearm and rebuild its forces, and unfortunately threaten the Baltic countries, Poland, or the Nordic countries. Then we will be in a situation where armament will accelerate. As long as there is war in Ukraine, Europe is “safe”; it is very unlikely that Russia would attack now, because it is weak.
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