For TKMS, a Record Order Book and a 12% Weekly Stock Drop Tell Two Very Different Stories

TKMS shares sink 12% as German government leverages MEKO frigates in F126 dispute, despite €20.6B backlog, record orders, and expansion plans.

Investors in TKMS are wrestling with a stark disconnect. The Kiel-based submarine builder boasts a bulging order backlog that tops €20.6 billion, yet its shares have just suffered their worst weekly slide in months, tumbling more than 12% and breaching the closely watched 50-day moving average. The culprit: a political standoff in Berlin over a delayed frigate programme.

At the heart of the selling pressure is the F126 frigate project, a roughly €12 billion programme that has been bogged down by cost overruns and delays. Rheinmetall is angling to take over management of the troubled programme, and the German government is reportedly using TKMS’s smaller, off-the-shelf MEKO A-200 frigates as leverage to push down the price. For the Kiel yard, the stakes are high. While policymakers play poker, the uncertainty is rattling the stock. The shares closed Wednesday at €76.20, sliding sharply below the 50-day line after losing more than a tenth of their value in a single week. In the prior session, the stock opened at €77.90 and finished at €75.90, a 2% decline.

Despite the bearish chart, TKMS’s operational engine is running at full throttle. At the end of March, the order book stood at a record €20.6 billion — more than four times the company’s current market capitalisation of roughly €5 billion. That backlog is driving an aggressive hiring push. TKMS, which currently employs 8,810 people across shipyards in Kiel, Wismar and Itajaí, Brazil, plans to take on thousands of new engineers, shipbuilders and specialists. The company is targeting annual sales growth of about 10%, with adjusted EBIT margins expected to climb from a projected 6% in fiscal 2025/26 to over 7% in the medium term.

Two major contracts could fan the hiring fire even further. Canada is evaluating the purchase of up to twelve submarines, and TKMS has submitted a bid. A preferred-bidder decision is expected by the NATO summit in July. Closer to home, TKMS leads a joint venture that is the sole bidder for Germany’s F127 air-defence frigate programme. Both projects would add significantly to production needs.

Financially, the half-year numbers underline the momentum. Revenue reached nearly €1.2 billion, while the adjusted operating profit improved to €60 million, translating into a margin just above 5%. Order intake hit €3.4 billion, fuelled by two new submarines for Norway and a historically large torpedo contract. One blemish is the negative free cash flow of €72 million, largely a base effect from unusually high customer advances for the Norwegian submarine project in the prior period.

The coming weeks will be crucial. TKMS is due to present at the Deutsche Bank Defence Conference in London on 22 June, and it will publish quarterly results on 12 August. For now, the stock still clings to a year-to-date gain of roughly 10%. But the next leg of the share-price story depends on hard decisions from the defence ministry. Once the preliminary MEKO contract turns into a firm build order, the current cloud of political brinkmanship should lift — and the market may finally focus on the sheer scale of the order book.