What happened?
Rheinmetall''s Q2 orders/ sales/ adj. EBITA/ FCF/ EPS are -69%/ -6%/ -5%/ -22% vs. BBG Consensus estimates.
Guidance for FY25 was ''only'' reiterated, yet both the better than feared Q2 release and wording points to upside risk:
. Sales: EUR 12.2-12.6bn (BBG: EUR 12.6bn | LTM Q2: EUR 10.7bn); Defence/Civil: +35-40%/flat confirmed
. Adj. EBITA: c. EUR 1.9-2.0bn (BBG: EUR 2.0bn | LTM: EUR 1.57bn); margin target: 15.5% (BBG: 16.0%)
. Op. FCF: EUR 0.7-0.8bn as per a 40% EBITA-FCF conversion target (BBG: EUR 0.9bn | LTM: EUR (8)m)
BNPP Exane View:
Firm orders are light at EUR 1.8bn (-69% vs. BBG), however, in a very small quarter vs. a particularly strong Q4, in our view, with the EUR 63bn order book (flat q/q) covering 5x sales 2025e; former RHM Nomination target of EUR 55bn in ''25 has been replaced by 1Y FW order pipeline target of c. EUR 60-70bn reflecting timing uncertainty on new orders. Execution was light due to several headwinds though with sales of EUR 2.4bn (-6%% vs. BBG) and adj. EBITA at EUR 276m (-5% below) thx to healthy margins ex ES. Given 1.7x as high sales in H2 vs. H1, Q2 FCF of EUR (911)m suffered from NWC build-up / low prepayments. Unch. FY25 guidance signals high confidence in H2 catch-up, yet, the impact from the 3.5% NATO declaration and the budget step-up in Germany should be in focus on today''s call.
Defence orders of EUR 1.8bn were -47% y/y vs. (low quality) Cons. at EUR 5.9bn with the order backlog at EUR 63.2bn and RHM Nominations of EUR 2.6bn in Q2. In the slides, RHM puts the German pipeline at EUR 46-58bn with international projects adding another EUR 13-15bn underlining the opportunity once decision-making is picking up, esp. in Germany.
Execution: Q2 sales at EUR 2.4bn (-6% vs. BBG) were particularly driven by the earlier mentioned pull-forward effects at Defence, a c. EUR 200m revenue slippage at WA and a later start in truck deliveries (c. EUR 0.3bn) for total DEF ex OH +18% y/y; PS weak as...
