While Q2 was a light print, it is a small quarter and was impacted by temporary headwinds. On the call, mgmt. reassured on FY25 guidance and reiterated conviction in securing c.50% of future procurement spending in Germany at ''good down payments''. With government planning in Germany spanning until 2029 and 2035, we expect growth to continue well beyond 2030, as should be discussed in more detail at the CMD on 14 Nov. As much as we can understand frustration with Q2 results, this should be temporary. Reiterate O/P.
Conf call: 2025 under control, 10y visibility in Germany, optionality elsewhere (BBG script)
Mgmt. flagged that the German govt.''s defence procurement plans cover the periods 2025-29 and 2029-35, with publicly discussed numbers for armored vehicles in Germany (HAG''s CEO pointed to a 5-digit number) considered ''very conservative'' by RHM''s CEO; thus, we think the EUR80bn pipeline through end-H126 is just the beginning. MandA might contribute c.EUR1bn pa to reiterated 2030 rev. of EUR40-50bn, which we estimate can easily be financed through down payments from Germany, while RHM''s size and relationships make it a go-to partner in our view. The recovery of deferred EUR0.6bn rev. at EUR120-150m op. profit in Q2 is encouraging, with full catch-up expected in H2.
Model update: fine-tuning post Q2 release, our 2026-28 adj. EBITA remains 7% above Street
Following today''s results, we fine-tune our model assumptions, and while we admit that a 6% cut to adj. EBITA ''25e is not necessarily comforting, we believe potential 20-30% pre-payments in/from Germany will provide more than enough offset given an order pipeline of c. EUR60-70bn over the next 12 months, and we note that these are barely reflected in consensus at this point.
Reiterate O/P: RHM is the German go-to defence OEM; initiation of coverage of RHM ADR
Our base case TP is EUR2,300, while a blue sky using a 26% contribution margin (vs 21%) would lift our adj. EBITA ''30e by c.20% to EUR9.5bn...
