JPM | Industrial Spec Sales, Rheinmetall, F126 and Defence budgets | Spec thoughts

Research evidence excerpt

JPM | Industrial Spec Sales, Rheinmetall, F126 and Defence budgets | Spec thoughts

Specialist Sales J P M O R G A N

24 June 2026

JPM | Industrial Spec Sales, Rheinmetall, F126 and Defence budgets |

Spec thoughts

Sam Edmunds

+44 207 742 8733

sam.edmunds@jpmorgan.com

Rheinmetall shares are trading c15% lower this morning on the back of an FT article which says that Germany is

planning to cancel the F126 Frigate programme and instead buy more of the smaller Meko warships. David’s take is here -

and he highlights that:

• RHM is now unlikely to make its Q2 or FY order guide

• The acquisition of the NVL shipyards becomes a much more questionable piece of capital allocation

• The defence industry is dependent on Governments as customers and they can and do change their minds on projects

• This is a time of technological change in the defence industry with new technologies such as drones, space and cyber all

making demands on already stretched Government budgets.

The rest of the defence sector is trading down in sympathy

- which implies that investors are concerned that this presages an overall reduction in defence spending. This worry is not new -

with the correlation between defence companies and rates markets growing in recent months. The sector has been trading poorly

for a while now - which does imply that ‘something has changed’ - and with the Russians saying yesterday that they would be

willing to negotiate with Ukraine on the basis of the ‘Istanbul communique’ there are some signs that the pressure is starting to

tell on Russia. That said, the ‘Istanbul Communique’ was never actually issued due to it being a repetition of Russia’s maximlaist

demands and therefore not acceptable to Ukraine. The question now is whether the defence sector is becomign ‘value’ or ‘value