Update on Rheinmetall ($RHM.DE): Charging toward global defence dominance
Si vis pacem, para bellum
Introduction
The 2024 financial results confirmed that Rheinmetall continues its ascent as a global defence powerhouse. With record-breaking sales, explosive earnings growth (no pun intended), and a multi-billion euro order backlog, Rheinmetall is transforming from a European player into a true global champion in defence technology. For long-term investors, the company is becoming increasingly difficult to ignore, and over the next decade it could develop into one of the largest European companies.
2024: A breakout year for revenues and profitability
Rheinmetall reported consolidated sales of €9.75 billion for FY 2024, a staggering 36% increase from the previous year. This wasn’t just incremental growth—it was a major leap forward, driven primarily by the booming demand in the defence sector. Sales in defence surged by 50%, while civilian performance was mixed, weighed down by ongoing challenges in automotive.
Operating profit followed suit, climbing 61% to an all-time high of €1.478 billion. That translates into an operating margin of 15.2% at the group level—up significantly from 12.8% in 2023—and a inspiring 19% in the defence segment. EPS rose to €16.51 from €12.32 a year earlier, and the company proposed a dividend of €8.10 per share, a 42% year-on-year hike.
These numbers aren’t just impressive—they show a company that is scaling fast, executing with precision, and benefiting from a long-term structural shift in European and global defence spending. Defence is secular and elevated spending likely has a multi-decade horizon.
Order backlog: €55 billion and climbing
As of year-end 2024, Rheinmetall’s order backlog hit a new record of €55 billion, up from €38 billion the year before. This includes both firm contracts and framework agreements—providing years of revenue visibility.
What’s fueling this backlog? A combination of massive orders from Germany, NATO partners, and Ukraine. The company’s “Zeitenwende” moment is in full effect, as European governments awaken to the realities of defense underinvestment and look to Rheinmetall to close the gap.
Divisional momentum: Strength across the board
Vehicle Systems: This segment delivered €3.79 billion in sales (up 45%) and an operating profit of €425 million. Key growth drivers included new truck and tactical vehicle programs and a huge €2.9 billion framework agreement for unprotected transport vehicles. Margin compression to 11.2% was a result of product mix, but the topline trajectory remains highly compelling.
Weapon and Ammunition: Rheinmetall’s ammunition business is the real rocket fuel. Revenues jumped 58% to €2.78 billion, and operating profit nearly doubled to €790 million. The order intake here reached €12.3 billion—more than quadrupling since 2022. Expect continued upside as NATO nations replenish stockpiles and Rheinmetall expands production capacity.
Electronic Solutions and Sensors: Though smaller in scale, these segments are crucial to Rheinmetall’s future as a systems integrator. Demand for surveillance, targeting systems, and electronic warfare capabilities is rising steadily.
Strategic Outlook: NATO rearmament supercycle just beginning
Rheinmetall’s trajectory is deeply intertwined with a once-in-a-generation rearmament cycle unfolding across NATO. Since the Russian invasion of Ukraine, European nations have ramped up defense budgets at a pace not seen since the Cold War. Germany’s historic €100 billion special fund is just the beginning. Countries like Poland, the Baltic States, Finland, Sweden, and the UK are all committing to long-term procurement plans—with Rheinmetall a clear beneficiary.
The company’s scale, technological leadership, and supply chain control give it a structural edge in absorbing this demand. Rheinmetall is not merely selling weapons—it is becoming a central node in NATO’s reindustrialization of its defense base. As governments seek security of supply, domestic production, and rapid delivery, Rheinmetall’s vertically integrated model and ambition to expand capacity position it for a dominant role.
The strategic value of Rheinmetall extends beyond Europe. Countries across Asia and the Middle East are exploring partnerships, and Rheinmetall’s growing presence in North America suggests this is not a regional player anymore. This is a defense company that has gone global—with long-term tailwinds to match.
Strategic Moves: Building a war-ready supply chain
Recent actions back Rheinmetall’s growth ambitions with tangible execution:
Hagedorn-NC Acquisition: On April 7, Rheinmetall acquired Hagedorn-NC, a nitrocellulose producer. Nitrocellulose is a critical input in propellant production, especially for 155mm artillery shells. This acquisition eliminates a key bottleneck and secures supply chain resilience for Rheinmetall’s ammunition business .
Autonomy Investment: The company is doubling down on battlefield robotics. Its PATH Autonomous Kit—already a standout at the 2024 ELROB competition—is being fast-tracked, supported by new Centres of Excellence in Germany, the Nordics, and the UK. Rheinmetall is taking a leadership position in digital warfare through scalable, AI-enabled mobility platforms .
GMARS Program with Lockheed Martin: Rheinmetall’s partnership with Lockheed Martin on the GMARS rocket launcher is gaining traction. The system—based on Rheinmetall’s HX3 platform—offers NATO interoperability and long-range precision firepower. A live-fire demo is planned for summer 2025, with the potential to unlock new export deals .
Source: https://www.rheinmetall.com/en/media/news
R&D and Digitalization: Future-proofing the battlefield
At Hannover Messe 2025, Rheinmetall showcased its advancements in robotics and teleoperation. Its YARO Cobot, developed by Yardstick Robotics, is built for extreme, unstructured environments—from disaster zones to military theaters. Meanwhile, its cloud-based POQUASIA project is pioneering post-quantum secure IoT platforms for remote vehicle control.
These aren’t blue-sky experiments. They’re battlefield-ready innovations that fuse civilian and military tech to give Rheinmetall a decisive edge in both procurement and capability.
Valuation: GARP in its purest form
On the surface, Rheinmetall’s forward P/E might seem high—currently trading at 39.5x 2025 earnings estimates. But this is only half the story. The company’s earnings are compounding at rates approaching 40% annually, meaning its PEG ratio (price-to-earnings-growth) is actually quite reasonable. As EPS expands to €95-€100 by 2029, the implied forward multiple drops sharply to just around 13x—almost value territory for a company with this growth profile.
Free cash flow generation is also accelerating. Equity FCF yield rises from 1.2% in 2025 to above 5% in 2029, supported by higher margins and tight working capital discipline. ROIC will also develop impressively and reach a level higher than 60% well above industry norms and a testament to Rheinmetall’s capital efficiency and pricing power.
The company’s ability to reinvest in high-return projects—combined with a disciplined M&A approach and rising dividend—gives it multiple levers to enhance shareholder value. In many ways, Rheinmetall offers the best of both worlds: the growth profile of a tech stock with the resilience and predictability of a defense contractor.
From my model I get the following intrinsic value for the company:
Final Thoughts: Bullish and staying that tay
Rheinmetall is no longer just a German defence supplier—it is rapidly becoming a global leader in ammunition, ground vehicles, autonomous systems, and precision fires. With a massive, sticky order backlog and world-class execution, it’s positioned to deliver multi-year compound returns.
For long-term investors seeking exposure to the rearmament supercycle, Rheinmetall offers a compelling blend of growth, profitability, and strategic relevance. The momentum is real, the numbers are strong, and the future for the company looks more positive than ever. Rheinmetall is on my watchlist and I find the company very compelling, however, this is not intended as investment advice, just sharing of the knowledge and view I have on the business.
With that, thanks for reading I truly appreciate the interest. Below are a few ideas for further readings and inspirations.
