What happened?
Rheinmetall''s Q4 orders/ sales/ adj. EBITA/ EPS came in -13%/ -6%/ -2%/ -17% vs. BBG Consensus estimates.
Guidance for FY25 was introduced - all guidance parameters for FY24 were achieved:
. Sales: EUR 12.5-13.0bn (BBG: EUR 12.7bn | LTM Q4: EUR 9.8bn); OSG target: 25-30% (BBG: 30.2%)
. Adj. EBITA: EUR 1.9-2.0bn (BBG: EUR 2,056m | LTM Q4: EUR 1,478m); margin target: 15.5% (BBG: 16.2%)
. Op. FCF: EUR 0.8bn as per a 40% EBITA-FCF conversion target (BBG: EUR 0.4bn | LTM Q4: EUR 1,023m)
BNPP Exane View:
After Renk''s and Hensoldt, RHM is the last German defence company to report Q4 results, which are a touch below Cons for op. profit, but better for FCF. While the print and ''25 targets support consensus for 25 (for both PandL and FCF), Europe''s commitment to step up defence spending to min. 3%, if not 3.5%, risk-reward is still skewed to the latter, in our view. Commentary on the pipeline (slides #6) is equally encouraging seeing an av. annual order potential of EUR 55-100bn in 25-30; note that RHM trades at ~6x EV/EBITA based on a 3.0% quota in our 2030 GDP scenario.
Defence orders were +40% y/y vs. Cons. at 31%. The order backlog has swollen to EUR 55bn at the end of Q4 with RHM Nominations at EUR 5.4bn / 26.8bn in Q4/FY. While the earlier guided EUR 60bn backlog target has thus not been met due to disruptions in parliamentary decision-making, RHM expects full catch-up in FY25.
Execution: Q4 sales at EUR 3.5bn (-6% vs. BBG) was driven by the WA segment (70% y/y), while VS (34% y/y) was softer; PS still weak (-15% y/y). Adj. EBITA / margin at EUR 773m / 22.2% (-2%/ +87bp vs. BBG); drivers: WA (320bp ahead), while VS was -480bp vs. BBG (mix related). FCF was strong at EUR 967m (125%/69% vs. adj. EBITA in Q4/FY) given strong op. profit / seasonal NWC relief (down EUR 459m q/q).
2025 guidance: RHM has overall delivered on its high promises / expectations with FY24 sales at EUR 9.8bn (vs. ~10bn guided | +36% y/y) and adj. EBITA of EUR 1.48bn...
