TKMS (360) | Reduce (Not Rated) | Great asset, stretched value

Research evidence excerpt

TKMS (360) | Reduce (Not Rated) | Great asset, stretched value

forecast the adj. EBIT margin to rise from c. 6.3% in 2026E to 7.5% in 2028E, as Dividend yield 0.9% 1.1% 1.4%

higher-margin programmes and a growing Atlas mix support profitability. ND(F+IFRS16)/EBITDA -7.0 -6.2 -6.0

▪Our estimates are aligned with company guidance and Bloomberg consensus at the GearingROIC -125.4%208.2% -129.8%358.7% -138.0%na

sales and EBIT levels but are more conservative below EBIT, where we believe EV/IC 75.3 na na

consensus assumptions regarding financial income and taxation are overly optimistic. Sector Most Pref. Sector Least Pref.

▪We initiate coverage with a Reduce rating and a EUR66 TP. While TKMS deserves a Exail Technologies Hensoldt

strategic and technology premium, our valuation framework – 50% DCF/50% Indra Saab Leonardo

transaction-based SOP, supported by ROC/EVA analysis – suggests the shares Rheinmetall

already overcapitalise backlog visibility, advance-payment-supported cash, and the Safran

risk-adjusted value of major programme opportunities.

▪The key risks are government budget dependency, delivery performance and

execution, supply chain disruption, customer concentration, export controls,

IT/cyber risks, backlog conversion, compliance, and guarantee availability.

Research Framework

Investment case Valuation methodology

n TKMS is Germany’s only conventional submarine supplier n Our EUR66 TP is based on a 50/50 blend of our EUR67 DCF

and a fully integrated naval “one-stop shop” across fair value and EUR64 SOTP fair value.

platforms, sensors, software, effectors and lifecycle n Our DCF uses an 8.0% WACC, 1.5% terminal growth and

services. 8.5% terminal EBIT margin. We set valuation WC changes