I am now also a Rheinmetall shareholder. How did this come about? First, a brief history of this traditional German company.
Back then
The history of $RHM (-0,48 %) goes back 136 years. Founded in Düsseldorf in 1889, the company quickly developed into a major arms and ammunition manufacturer. As early as the First World War, Rheinmetall was one of the most important suppliers of armaments to the German Empire. We will simply leave out the Second World War here, due to certain reasons.
From 1956, Rheinmetall established itself as a supplier of tanks, artillery systems and ammunition to the Bundeswehr and its NATO partners. In 1991, Rheinmetall became globally active in the defense business and began to gain a foothold in civilian vehicle construction at the same time.
Today
Rheinmetall was included in the DAX in 2023. The company gained great importance due to the Russian war of aggression against Ukraine. The company has recently been divided into the following segments defense and Mobility.
The current business segment
As already mentioned, Rheinmetall is divided into
- Defence (weapon systems, tanks, ammunition, electronics)
- Mobility (vehicle drives, automotive components)
Defense is by far the most important area, accounting for around 80% of sales - an effect of the war in Ukraine. The Mobility division, on the other hand, is currently under considerable pressure. Rheinmetall is planning to sell its Mobility division or gradually convert it into parts that are used directly for armaments production. A complete immediate exit is not planned; rather, the transition is to take place gradually in order to free up existing expertise and capital.
The competition
Despite its strong market position, Rheinmetall faces intense competition.
The most important competitors are:
- KNDS (Krauss-Maffei Wegmann & Nexter): Offers direct alternatives with Leopard 2 and Leclerc tanks.
- $BA. (-2,79 %) (GB/USA): Heavyweight in artillery systems and infantry fighting vehicles, particularly in the overseas market.
- General Dynamics European Land Systems (USA/EU): Specialist in armored transport vehicles and bridge systems.
- $LDO (-2,39 %) (Italy): Strong in aviation components and artillery ammunition.
- $SAAB B (-3,56 %) (Sweden): Leader in light combat vehicles and air defense systems.
Some of these competitors score points with more specialized product portfolios or closer political alliances. Rheinmetall, on the other hand, benefits from its broad vertical integration, fast delivery capability and close ties to the German armed forces and other EU armed forces.
The most important products in the Defense sector
- Tanks and infantry fighting vehicles
- KF51 Panther: State-of-the-art main battle tank developed and produced by Rheinmetall since 2022
- KF41 Lynx: New infantry fighting vehicle produced in cooperation with Steyr.
- Leopard 2: Just Leopard. Really cool part with lots of power. The Russian terror par excellence.
- Artillery systems and ammunition
- Air defense and navy
- Electronics and protection systems
Why I invested
For me personally, a mixture of the following factors played a role:
- Strong order volume: the bulging order book secures production capacity for years to come.
- Political tailwind: European countries are permanently increasing defense spending.
- Technological leadership: Rheinmetall remains at the forefront with innovations in armor technologies and modern fire control systems.
Outlook and continuation
Rheinmetall is at a turning point: the sale or transformation of the Mobility sector will free up funds to further expand the Defense activities. In view of global uncertainties, the defense budgets of NATO and EU countries are likely to remain high in the long term, which will create new opportunities:
- Unmanned vehicles & drones: Expansion of autonomous land and air platforms.
- Cyber & electronic defense: Integration of digital defense systems into existing platforms.
- International cooperations: New joint ventures in North America and Asia, for example, to open up additional markets.
Rheinmetall is also planning to modernize its production facilities and invest more in digital manufacturing processes. The aim is to streamline the supply chains and at the same time be able to react more flexibly to crisis requirements. If the Mobility division is transferred completely to external hands, the management expects that the Group will be able to focus more than ever on its core business - and thus further increase its margins.
The future share price - just a bubble due to the war in Ukraine?
It is difficult to predict whether Rheinmetall is just a bubble that will burst once the war in Ukraine is over. An official peace agreement could lead to profit-taking and share price losses in the short term, as acute peaks in demand for ammunition and vehicles could be eliminated. In the long term, Rheinmetall could nevertheless benefit if the EU countries are interested in a long-term rearmament and modernization of their military.
Conclusion
For me personally, this means that I am staying on board for the long term, keeping a close eye on developments and betting on a share that can continue to perform above average in the coming years on the basis of stable order pipelines and technological innovation, but still see the risk of a potential bubble bursting.
Not investment advice. This is a personal assessment.
