Rheinmetall Faces Margin Pressure as New Rival Enters Key Market

Rheinmetall faces profit margin pressure as Nammo-Diehl JV enters 155mm artillery market, triggering analyst target cuts and a 19% stock decline.

The approval of a new joint venture has set the stage for increased competition in Rheinmetall's most profitable segment, prompting analysts to reassess their outlook for the defense contractor. Germany's Federal Cartel Office has cleared the way for a partnership between Nammo and Diehl to begin competing in the domestic market for 155mm artillery ammunition. According to analysis from mwb research, this specific segment contributes approximately one quarter of Rheinmetall's total operating profit.

Market Reaction and Revised Targets

The equity has already reflected the challenging shift in its competitive landscape. Over the last 30 days alone, Rheinmetall shares have declined by about 19%, trading well below their moving averages. The current price sits nearly 31% below its 52-week high of €1,995, which was recorded as recently as late September 2025.

This development has triggered immediate responses from financial institutions. mwb research reduced its price target from €1,700 to €1,500, maintaining a "Hold" rating on the stock. The rationale centers on the expectation that heightened competition will lead to pricing pressure, which in turn erodes profit margins.

In a separate move, Bank of America also adjusted its valuation, cutting its target from €2,220 to €1,830. However, the bank continues to recommend a "Buy." Notably, Bank of America's recent sector study identified Hensoldt as its preferred choice within the defense sector.

Strategic Diversification Amid Core Business Challenges

Confronted with this pressure on its core ammunition business, Rheinmetall is pursuing a strategy of expansion and diversification. The acquisition of NVL (Naval Vessels Lürssen) is a key part of this plan, aiming to establish the company as a systems provider for maritime defense solutions. This segment is gaining strategic importance due to trends toward networked naval operations and autonomous systems.

Despite this strategic pivot, the immediate question remains unanswered: can the planned volume expansion in Rheinmetall's ammunition division offset the potential margin contraction caused by the new Nammo-Diehl alliance? The company's record order backlog and rising global defense budgets are favorable factors. Nevertheless, the competitive dynamics of the 155mm ammunition market have fundamentally changed from just a few months ago. Upcoming quarterly results are anticipated to provide the first concrete evidence of the new rival's impact on Rheinmetall's profitability.