RHM: Future Gains Will Be Driven By Expanding European Defense Shipbuilding Focus

The analyst price target for Rheinmetall has been raised by about EUR 50 to roughly EUR 2,220, as analysts point to sustained order visibility, incremental margin improvement and supportive sector re-rating, reflected in a series of recent Buy and Overweight initiations and target upgrades.

Analyst Commentary

Recent research updates underscore a broadly constructive stance on Rheinmetall, with multiple price target increases clustered around the EUR 2,000 to EUR 2,300 range. The moves reflect rising confidence in the company’s growth trajectory, supported by structural defense spending tailwinds and strong order visibility.

At the same time, some coverage initiations strike a more measured tone, flagging valuation risks after the share price rally and emphasizing the need for consistent execution to justify elevated expectations.

Bullish Takeaways

• Bullish analysts are lifting price targets into the low to mid EUR 2,000s, arguing that consensus still underestimates the earnings power from the expanding order book and sustained rearmament cycle in Europe.
• Several target upgrades highlight improving margin potential, as higher volumes, mix and operating leverage are expected to support upward revisions to mid term profitability assumptions.
• Coverage initiations with Buy recommendations point to Rheinmetall’s strategic positioning in key European defense programs as a driver of above sector growth, supporting premium valuation multiples versus legacy industrial peers.
• Constructive analysts see recent sector re rating as only partially reflecting the multi year growth runway. They suggest further upside if execution on backlog conversion and capacity expansion remains on track.

Bearish Takeaways

• More cautious analysts describe the shares as priced for perfection after the recent rally. They warn that the current valuation leaves limited room for execution missteps or order delays.
• Neutral stances emphasize that much of the defense spending boom is now embedded in forecasts. This increases the risk that any moderation in budget growth or program timing could trigger de rating pressure.
• There is concern that elevated expectations for margin expansion may prove ambitious if supply chain constraints, cost inflation or ramp up inefficiencies limit operating leverage.
• Some research notes highlight that, while long term structural drivers are attractive, near term upside may depend on incremental positive surprises on contract wins or earnings beats to justify further target upgrades.

What's in the News

• Rheinmetall plans to sell its remaining civilian businesses in the first quarter of 2026, sharpening its focus on core defense activities and exiting non defense segments (Key Developments).
• The company aims to become a one stop shop for European defense needs across land, sea and air, including management centres, missile systems, launchers and simulation systems (Key Developments).
• Rheinmetall is preparing to enter the shipbuilding business as part of its strategy to broaden its role in supplying Europe’s growing defense requirements, according to CEO Armin Papperger (Key Developments).

Valuation Changes

• Fair Value: risen slightly to about €2,222 from roughly €2,174, reflecting a modestly more optimistic intrinsic valuation.
• Discount Rate: increased marginally to around 5.66 percent from about 5.45 percent, implying a slightly higher required return and risk perception.
• Revenue Growth: edged down to approximately 35.6 percent from about 37.0 percent, indicating a small tempering of top line growth expectations.
• Net Profit Margin: improved slightly to roughly 12.9 percent from about 12.5 percent, signaling incremental optimism on profitability.
• Future P/E: moved up modestly to around 38.6x from about 37.4x, suggesting a small increase in the valuation multiple applied to expected earnings.