Rheinmetall "To be disrupted, or not to be disrupted" (Buy) Weier

Research evidence excerpt

Rheinmetall "To be disrupted, or not to be disrupted" (Buy) Weier

Addressing current market concerns

We think that there are a growing number of market concerns that have lead to the So many concerns seem now priced

underperformance of Rheinmetall shares. We think while some of them appear quite that 'little' things could start to be a

fair this seems overly discounted in the shares by now. The shares are at a level where a positive catalyst

recovery is now not so much about regaining positive earnings momentum or achieving

a major positive catalyst. We think it's rather about the market realising that the level of

earnings downgrades discounted could be excessive. In addition, smaller catalysts like

re-assurance on the detailed German budget could bring back some confidence over the

summer.

Figure 1: Rheinmetall year-to-date performance

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Source: Datastream

Lack of earnings and order momentum catalyst

We think that since the passing of last year's NATO summit the sector has been lacking a It seems last year's NATO summit was

major positive catalyst. It seems that investors might have struggled to see what should the last major sector catalyst

come on top of a 5% NATO spending target. Since then it has been more about how

achievable the targets really are rather than how high they could be. Rheinmetall

specifically rather had some mixed quarter reporting since then and the market

wondered about execution (see below) and achievability of its ambitious targets. In

addition, we believe investors want to see big orders finally coming through and do not

give any upfront credit. While we are below consensus for the years after 2027 as we

apply a safety discount for the timing of the Boxer, ammunition and missile orders, we