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Rheinmetall on the verge of becoming a global arms giant.

by Tim Straiton

Rheinmetall (RHM) is currently trading at EUR 524.50 and is 37% above its 200 day moving average. It traded as high as 571 in early April 2024. The current short-term consolidation is likely to give way to further upside. The MACD reflects the fading downside price action.

Growth ambitions and future plans

Rheinmetall AG, a major player in the international arms market, is on a dynamic expansion path. In view of the strong demand for weapons and ammunition, particularly due to the Russian attack on Ukraine and the resulting rearmament of NATO countries, CEO Armin Papperger is forecasting continued sales growth. The aim for the current year is a sales target of ten billion euros, while the order backlog is expected to reach 60 billion euros.

Plans for a European defense systems house

Papperger proposes the establishment of a European defense system house that could compete with the large American corporations with a turnover of 30 to 35 billion euros. This proposal, presented to the Düsseldorf Business Journalists Association, aims to consolidate the fragmented European defense landscape and create a stronger, more unified presence.

Expansion in the USA and global ambitions

Rheinmetall is also aiming for an increased presence in the American market. The group is currently applying to develop a successor model for the US Bradley infantry fighting vehicle, a project that could potentially cost over $45 billion. Papperger is optimistic about the prospects of winning the contract, and the group is also exploring possible takeover candidates in the USA.

Calls for increased defense spending

In view of the increasing global security challenges, Papperger is calling for a significant increase in the German defense budget. Annual spending currently amounts to 52 billion euros, a sum that Papperger says should be increased by at least 30 billion euros to ensure Germany's defense capability and meet NATO's requirements. This is particularly important because the special fund of 100 billion euros, which was set up in 2022 after Russia's attack on Ukraine, is expected to be used up by 2026

Bottlenecks and long-term planning

The shortage of military equipment and empty ammunition depots are both a challenge and a business opportunity for Rheinmetall. Papperger points out that Germany – similar to other NATO countries – urgently needs to invest in replenishing its warehouses. Especially for artillery ammunition, a large part of which was delivered to Ukraine, the Rheinmetall boss estimates that a ten-year production period will be necessary to cover demand.

Future company goals and market value increase

Since the start of the Ukraine war, Rheinmetall's market value has increased approximately fivefold and currently stands at around 22 billion euros. However, Papperger is ambitious to increase this value to 50 billion euros in the coming years. This objective underlines the Group's self-confidence in its growth strategy and the strengthening of its global positioning.

Rheinmetall faces significant opportunities and challenges. With targeted expansion plans, a clear vision for the European defense industry and a committed focus on the needs of the Bundeswehr and international armed forces, the group is positioning itself as a central player in an increasingly volatile global environment. The proposed measures and ambitious targets reflect a clear strategic direction that could shape not only the company, but also the geopolitical landscape of Europe and beyond.


 


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