2Q26 Preview: Reassuring Trading; Mixed Implications of F126 Assessment

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2Q26 Preview: Reassuring Trading; Mixed Implications of F126 Assessment

e a €1.4bn annual impact in 2030, in line with

the company's indication. This results in a 1-2% reduction in sales across FY26-28,

partly offset by a 10-15bps improvement in margins due to a more favourable sales

mix. Our valuation is unchanged, and we reiterate our €1,750/share price target.

2Q26 Key Takeaways? Rheinmetall hosted its 2Q26 Analyst & Investor Recap Call,

providing an update on defence spending, on the second quarter and on latest

development on Arminius contracts. On Defence spending, Germany's latest budget

draft points to a defence budget of ~€145bn in 2027, up ~21% yoy, reinforcing the

company's medium-term visibility for domestic defence spending. A more detailed

budget is expected before Parliament's summer break. On financial performance,

Rheinmetall reiterated it remains on track to deliver Q2 revenue growth of >60%

yoy, implying H1 growth of ~35-40%. It is supported by project ramp-ups, the

€100m from Murcia restart and €200m from truck deliveries. The company also

continued its portfolio optimisation, signing the €350m disposal of Power Systems,

with closing expected in Q4. On the F126 cancellation, the German MoD cited cost

overruns, contractual issues with Damen and faster delivery from alternative

platforms as the key reasons for their decision. The company highlighted 3 impacts,

which are: 1) reduction of expected Q2 nominations from €20bn previously to "low

double-digit €bn", 2) a potential revenue headwind of up to €300m in FY26, if no

mitigating measures can be identified while Rheinmetall is still assessing the impact

on FY26 guidance and will provide a more detailed update at Q2 earnings release