What happened?
RHM''s Q1 pre-released sales and adj. EBITA are some 20% above consensus (both Vara and BBG). Besides, the order backlog has reached EUR 62.6bn thanks to EUR 11.0bn in Rheinmetall Nomination in the quarter. Although not disclosed, both the better than expected op. profit and strong order pattern bode well for pos. FCF in the quarter, which would presumably be the first time ever, and occurring in a year with all-time high capex spent.
Guidance for FY25 was ''only'' reiterated, yet, both the decent Q1 release and wording suggests risk is to the upside:
. Sales: EUR 12.2-12.6bn (BBG: EUR 12.6bn | LTM Q1: EUR 10.5bn); OSG target: c. 25-30% (BBG: 29%)
. Adj. EBITA: c. EUR 1.9-2.0bn (BBG: EUR 2.0bn | LTM Q1: EUR 1.54bn); margin target: 15.5% (BBG: 15.9%)
. Op. FCF: EUR 0.7-0.8bn as per a 40% EBITA-FCF conversion target (BBG: EUR 0.9bn | LTM Q4: EUR 0.55bn)
BNPP Exane View:
Q1p sales - pull-forward effect at Defence drives the beat: Preliminary group revenue of EUR 2.305bn (+46% y/y) is solely driven by the defence operations that are said to be up almost 73% benefitting from (unquantified) pull-forward effects from the second quarter to the first quarter. These were apparently not visible at the time of the pre-close call on 8 April when IR pointed to Defence sales being up ~40% vs. flat for Power Systems (PS), i.e. mirroring the full-year target framework. We understand that this tailwind was broad-based as the recent discussion has been focused on ammunition restocking, air defence and digitalisation as the key areas for procurement. In turn, and assuming an intra-company sales of some EUR 150m share, this implies a double-digit decline at PS, yet, down only LSD sequentially.
Q1p adj, EBITA some 20% ahead: At EUR 199m (margin: 8.6% | +20bp y/y), both Vara''s EUR 166m and BBG''s EUR 163m (margin: (8.5% / 8.7%) adj. EBITA beats expectations by ~20%. Growth at Defence reached 96% though implying adj. EBITA of c. EUR 210m / a margin of c....
