Rheinmetall: Turbulent Waters

Research evidence excerpt

Rheinmetall: Turbulent Waters

xpectations of an

PREV

imminent F126 order. We believe that this could happen through (1) setting up credible, intermediary

targets rather than extending the 2030 outlook, which is now greatly called into question, (2)

reframing the group's 2030 outlook excluding M&A and possibly providing some visibility on

Exhibit 1 - Type 31 revenue phasing vs.existing platforms vs. new businesses (i.e., missiles, space...), and (3) delivering on other key order deliveries

assumptions, including Arminius (Boxer) contract. Regarding the Boxer contract, we do not expect in £m

negative news following the cancellation of the F126 program, as there would be no alternative 250 Deliveries 100% 120%

78%platform to fulfill NATO requirements. Despite investor skepticism around the relevance of armored 200 91% 100%

150 65%vehicles in a world of drones, we noted full industry alignment at Eurosatory in stating that drones 48% 80%60%

40%will not replace armored vehicles but come alongside them. In terms of timing for Rheinmetall 100 21% 33%

14% 20% 7%shares to rebound, we believe upcoming A&D IPOs might need to be digested, including some 50 3% 4%

reassurance that the Arminius contract is still coming, which could be post summer. 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 0%

Revenues Cumulative revenues

.

Valuation at low point. With the focus on near-term execution, we move our valuation to 2028 vs. Source: Jefferies estimates

2030, and use an average of 13.6x EV/EBIT (13.9x prev.), as we derate Naval to 10x (vs. 12x). We

make limited changes to our assumptions, with 1-4% EPS cuts over 2027-30, and assume we have

now largely de-risked our assumptions for M&A and moonshots, standing at €40.3bn of revenues

in 2030, 20% below the group's target.