What happened?
Rheinmetall''s Q1 orders/ sales/ adj. EBITA/ FCF pre-tax are unchanged vs. the pre-release on 28 April; EPS are +29% vs. BBG Consensus estimates. Please find our initial comment here.
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: 15.8%)
. Op. FCF: EUR 0.7-0.8bn as per a 40% EBITA-FCF conversion target (BBG: EUR 0.9bn | LTM Q1: EUR 1.0bn)
BNPP Exane View:
While the pre-release only pointed to 70% growth in sales and a 96% jump in op. profit at Defence, the final Q1 print shows that WAandVS were the key drivers behind strong group adj. EBITA. Firm orders reached EUR 3.4bn (-53% vs. BBG), but strong frame nominations offset here. Thanks to both, good execution and prepayments received FCF came in at a very strong EUR 0.3bn. While RHM has not altered FY25 guidance, the wording (''at least confirmed'') paves a clear way for what should be expected going forward. As the latest statements of NATO Secretary General Mark Rutte left no doubt that Europe should step up defence spending to min. 3.5%, risk-reward is still skewed to the latter, in our view. Commentary on the pipeline (slides #5/6) is equally encouraging, hence, we reiterate O/P.
Defence orders were -11% y/y and 53% Cons., yet, offset by frame nominations of EUR 9.3bn. Both, the order backlog of EUR 62.6bn and RHM Nominations of EUR 11.0bn in Q1 were confirmed. The full-year target of EUR 30-40bn for RHM Nominations was raised to EUR 55bn (slide 6) with Germany playing a key role contributing 90%.
Execution: Sales at EUR 2.3bn (+18% vs. BBG upon pre-release) were particularly driven by VS/WA (+93%/+65% y/y) - also due to the earlier mentioned pull-forward effects; PS weak (-6% y/y). Strong adj. EBITA / margin at...
