Record Backlog Can’t Mask Hensoldt’s Valuation Stretch, Say Analysts

Despite a €9.8B order backlog and 25% revenue jump, mwb research warns of overvaluation with a €62 target, citing high P/E and capacity risks.

Hensoldt’s soaring order book and a tax-free dividend payout have done little to quiet the bears. While the defence electronics group sits on a record €9.8 billion backlog and saw first-quarter revenue jump 25% to €496 million, mwb research is sticking to its sell rating with a price target of €62 — implying nearly 30% downside from the current €84.12 level, where the stock slipped another 1.5% on the day.

The tension between strong operational momentum and an expensive share price is stark. Rheinmetall, a rival growing sales at 36% — more than double Hensoldt’s 16% — trades on a 2027 price-to-earnings multiple of roughly 22. Hensoldt commands around 40. That chasm, mwb argues, defies fundamental justification. “The problem is not the present — it’s the expectations for the future baked into the price,” the research house notes.

Shareholders collected a €0.55 per share dividend on Wednesday, marking a 10% increase from last year and distributing a total of €63.53 million. The payout is structured as a tax-free distribution from the company’s contribution account under German corporate tax law, meaning no withholding tax, solidarity surcharge or church tax for domestic investors. Instead, the payment reduces the tax cost basis of the shares, deferring the tax liability until sale. The annual general meeting on 22 May had approved the proposal with 99.99% of votes, representing 67.11% of the share capital. Of Hensoldt’s €173.25 million net retained profit, some €109.72 million will be carried forward after the distribution.

Despite the dividend cheer, the company faces capacity bottlenecks. Management is responding with targeted M&A: the purchase of Dutch optronics specialist Nedinsco, announced in March, is due to close around mid-2026. The 140-employee firm, with sites in Venlo and Eindhoven, will be fully funded from existing cash and integrated into Hensoldt’s optronics segment. In the meantime, the order backlog continues to swell, and how quickly the group can convert it into revenue without delays will be a key metric in coming quarters.

A big chunk of Hensoldt’s business depends on optronics and sensors for armoured vehicle platforms such as Puma, Luchs and Leopard. Procurement decisions for these systems follow political timelines, and mwb warns that budget delays are a risk not adequately reflected in the current share price. The house also points to the partial sale of KNDS’s stake in tank supplier Renk as a signal that confidence in the armoured vehicle sector itself is ebbing.

The “software-defined defence” narrative has attracted many investors, with partnerships including AI firm Helsing, the BattleLab project and a sovereign cloud. While mwb does not question the strategic direction, it cautions on timing: software-based revenue is expected to remain below 10% of group sales until 2030. A genuine technology premium, the analysts argue, would only be warranted when that share surpasses 30% — still a distant prospect for Hensoldt.

Technically, the stock is treading water near a support zone between €83.40 and €85.36, which coincides almost exactly with the 200-day moving average at €83.81. The ex-dividend adjustment on 25 May triggered a steeper drop than the €0.55 payout alone would explain, as profit-taking amplified the move. The relative strength index stands at 64.1, indicating a mildly overbought condition. Should the support band break, the next floor sits around €79.67 — a further decline of roughly 5% from current levels. Management, however, holds firm on its full-year revenue target of €2.75 billion, betting that capacity expansions and the Nedinsco acquisition will help chip away at that record backlog.