CMD-23: Bullish new targets with room for a further upgrade

Rheinmetall has hosted an impressive CMD outlining strong mid-term prospects. It has increased its mid-term sales target by ~20% and the EBIT margin target by 200bps, largely supported by strengthening operating leverage in defence. The company is open to selling its Civil businesses (now regrouped under the Power Systems segment) if it receives a fair offer. The CMD confirmed our positive view on the company, now beyond 2026 also.

9M 23: Rheinmetall could surpass its full year target

Rheinmetall published strong 9M results largely driven by the VS and W&A divisions. Q3 sales rose by 24.2% yoy and the operating result by 59.2%. The performance in civil businesses finally recovered after H1 being severely impacted by cyberattacks. The orderbook reached an all-time high of €36.4bn and the management has re-iterated the FY23 guidance on the back of the good business development.

H1 23: strong rally in order intake and capacity increase

Rheinmetall published H1 results in line with the consensus. Q2 sales rose by 6% yoy and the operating result was flat with the performance driven by the military business, partially offset by weaker civilian business which was impacted by higher input costs and additional business recovery costs following the cyber-attack (~€10m) on civil IT systems in April. The orderbook reached an all-time high level of €30bn and the management has re-iterated the FY23 guidance on the back of good business d

Q1 23: starting the year with improved cash generation

Rheinmetall published weaker than expected Q1 results. Sales were 5% above consensus, but operating income dropped by 20% to €73m, missing the consensus by 10% due to a lower contribution from the Chinese JV and other associates, as well as due to staff payments to compensate for inflation. Operating earnings excluding these at-equity results improved by 12.6%. The company re-iterated its FY23 despite a weak Q1 because profitability is expected to be back-end loaded (>2/3rds of the operating res

FY22: outlook much brighter than the conservative guidance

Rheinmetall has delivered a strong set of FY22 results, in line with the consensus. The company also published a very conservative guidance for FY23. After the conference call it seemed clear that this guidance is just a safety net to ensure that the company does not miss the management’s targets and we thus expect multiple positive revisions over the course of the year. Following this release we will upgrade our estimates, resulting in a positive revision to the target price.

CMD-22: All in on munitions

Rheinmetall has hosted an impressive CMD with strong long-term prospects. It has now finally disposed of its Piston unit and can focus on its core Defense activities and some niche EV applications. NATO budgets are still ramping up and ammunition has become a scarce commodity in the current war. Rheinmetall has decided to grow externally to accelerate the ramp up of production, which should enable it to benefit fully from the strong current momentum.

Q3-22: guidance maintained despite orders being pushed back

Rheinmetall delivered results spot on guidance. The sales and operating results were bang in line with the consensus, which comes as positive news given the push-back on German military orders and the Australian jumbo contract. The guidance was reiterated, suggesting that the Q4 will be massive as last-minute orders will empty the high inventories.

Q2 22: massive German orders postponed

Rheinmetall has posted results globally in line with expectations. It has already warned that its FY22 sales guidance would be at the lower end of the range, as Auto is facing larger than expected headwinds. The real negative news comes from the postoned German €35bn contracts, which pushes forward the expected order intake and associated sales. Losing the bid in Slovakia and Czech Republic did not help the current order intake.

Q1 22: Weapon & Ammunition improves the product mix

Rheinmetall has published robust results, though globally anticipated by the market. The strong growth in Weapon & Ammuniton has resulted in a better product mix and higher margins. The order backlog of its Defence activities have increased healthily, as governments are progressively increasing their spending. Rheinmetall is still waiting for a firm order by the Bundeswehr to invest in extra capacity and start its promised revenue expansion. It has given more visibility on sales heading into FY2

Q4 21: optimism on the stock justified

Rheinmetall finished the end of the year strongly. The financial figures were heading in the right direction even before the conflict started as announcements on increasing military budgets had been made. The outlook has never been brighter for the German defence company, and we believe the short-term results will be boosted by a strong performance in Weapon & Ammunition and its high/fast capacity increase potential.

Explosive surge after Bundeswehr unveils doubling of military budget

We had previously discussed that, through its exposure to Eastern European countries and its strong Defence portfolio, Rheinmetall was well set to perform extraordinarily well. The recent news of the German government doubling its defence budget should accelerate Rheinmetall’s growth and confirms the positive momentum of the stock.

Q3 21: Semi shortage hits sales guidance

Rheinmetall published an encouraging set of results, with slightly disappointing sales but better-than-expected margins. Semiconductor and other raw material shortages impacted Rheinmetall this quarter, a situation which is expected to last through at least Q4. The Piston business continues to await disposal.

Q2 21: record margins, no Piston updates

Rheinmetall published a record H1 reported EBIT thanks to cost savings that were implemented in FY20 that are now paying off. The Vehicle Systems division announced a record level of backlog at €10.5bn, boosted by significant contracts in Q2. Guidance has been confirmed for FY21, but still no news on Pistons.

Q1 21: Automotive and Ammunition boosts first quarter

Rheinmetall published results above expectations in sales and margins, confirming a good start to the year. The disposal of its Piston unit will give fresh impetus to its operating margins in the mid-term. Uncertainties could arise from the German elections and the semiconductor shortage, which it is starting to notice in its Automotive sector.

Reshaping of the Auto business

Rheinmetall held an investor update call on Thursday, 4 February, on which it provided preliminary information regarding its FY20 earning as well as the key strategic objectives towards 2025.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Morning Note – 16 April 2024

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

PROGRESSIVE: Severfield: Step change in European and Indian outlook

Severfield’s full-year results to March will be ‘slightly above’ the Board’s expectations, according to today’s trading update, with net debt significantly better. We maintain our PBT estimates for both forecast years, which are ahead of consensus, but reduce our net debt for FY24E. Record orders were boosted by the steel specialist’s European operations, after last year’s Voortman acquisition, while the Indian JV has seen ‘another step up in profitability’. The group has also launched its first

FY results: strong cash flow

Clean and competitive fertiliser

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no