Rheinmetall Stock Valuation Questioned as New Ammunition Competitor Emerges – Analyst

Rheinmetall AG’s (ETR: RHM) premium valuation is facing fresh scrutiny after mwb Research warned in a recent note that a newly approved rival in Germany’s defence supply chain could erode one of the company’s most lucrative profit engines.

Analyst Jens-Peter Rieck said the market continues to treat Rheinmetall as the “clear scarcity winner in ammunition,” but argued that this scarcity “is no longer as secure as current valuation implies.”

According to mwb Research, the approval of the Nammo/Diehl joint venture by the German cartel office in March marks a meaningful shift that investors have “largely overlooked,” as the news was overshadowed by the company’s FY25 results.

The broker highlighted that Rheinmetall’s earnings base is more concentrated than many assume. Rieck noted that around 46% of the group’s projected 2030 EBIT is tied to the Weapons & Ammunition segment, with roughly a quarter of total EBIT linked to 155mm artillery ammunition alone. This is precisely the area now opening to competition.

The Nammo/Diehl venture is said to lower the barriers to entry in what has been Rheinmetall’s domestic stronghold. mwb Research said Germany is signalling it is “no longer willing to rely on a single supplier in one of its most critical ammunition categories.”

Rieck acknowledged that Rheinmetall retains a major scale advantage and is targeting annual capacity of 1.5 million artillery rounds by 2030, but warned that the emerging competitor could achieve “meaningful output by the end of the decade,” reducing Rheinmetall’s long-term pricing power.

Reflecting this structural shift, mwb Research cut its price target on the stock from €1,700 to €1,500 and reiterated a Hold rating, implying just 4.5% upside from the current €1,436 share price.

“Rheinmetall remains one of the clearest structural beneficiaries of European rearmament, but we see less room for
further upside while an increasing share of 2030 earnings depends on a segment where competition is now clearly rising,” the firm concluded.