Rheinmetall Gains on Drone and Korean Missile Deals, Yet MGCS Woes Keep Stock Under Pressure

Rheinmetall announced a JV with South Korea's LIG D&A for air defense and a new drone launcher, but shares remain 27% down YTD due to Franco-German MGCS tank project delays.

Rheinmetall used this week’s Eurosatory defence exhibition in Paris to unveil a pair of strategic moves, but the Düsseldorf-based group’s beleaguered share price still faces headwinds from a stalled Franco-German tank project.

The company announced a joint venture with South Korea’s LIG Defense & Aerospace, taking a majority stake in a new entity that will target European and NATO air-defence markets. The venture integrates Seoul’s medium- and long-range missiles into Rheinmetall’s existing platforms, aiming to deliver interceptors in the “high five-figure” euro range — a dramatic cost saving over traditional systems that often exceed €1 million per shot. LIG D&A, which posted revenue of around €2.5 billion in 2025, brings technology that plugs gaps in Rheinmetall’s short-range portfolio.

Alongside the Korean pact, the group showcased a mobile missile launcher that emerged from its own development pipeline. Dubbed the Containerized Missile Launcher, the system fits inside a standard 20-foot shipping container and can fire up to 18 FV-014 kamikaze drones in near-simultaneous salvos. The drone has a 100-kilometre range, a 70-minute flight endurance and carries a four-kilogram warhead. Swarm launches are possible, though a human operator retains control over the attack order. Production is slated to start in the third quarter of 2026, with Rheinmetall converting a former automotive supplier plant in Neuss for the assembly line.

Investors gave the Paris debuts a cautious thumbs-up. Rheinmetall’s stock climbed 2.1% on Tuesday to €1,166.40, halting a recent slide. But the relief rally did little to shift the underlying technical picture — the shares remain roughly 27% lower than at the start of the year and trade only a whisker above their 52-week low of €1,099.80. The 50-day moving average sits more than 10% above the current price, a clear signal that momentum remains fragile. The relative strength index at 36.3 edges towards oversold territory but has not yet triggered a sustained rebound.

The biggest cloud over the stock is the Main Ground Combat System (MGCS), the ambitious Franco-German successor to the Leopard 2 and Leclerc tanks. Originally hailed as a pillar of European defence cooperation, the project has seen its target date pushed back to 2040. Rheinmetall and fellow German contractor KNDS Deutschland are already working informally on a “Leopard 3” interim model. Chief executive Armin Papperger refused to rule out a French withdrawal from MGCS — a striking admission that signals the flagship programme may be unravelling. That uncertainty has weighed heavily on the equity, which closed at €1,142.40 before Tuesday’s bounce, roughly 29% below its end-2024 level.

None of this hesitation shows up in the group’s order book. Rheinmetall sits on a record backlog of €73 billion, and management has reaffirmed its full-year guidance after a solid first quarter. Revenue rose 8% year-on-year, while operating profit jumped 17% to €224 million. Yet the new drone system has not yet translated into binding orders — the Eurosatory buzz, for now, remains just that. To turn the stock around, the company will need to convert exhibition floor visibility into contract signatures, and fast.

The Korean joint venture offers a more immediate revenue path. By pairing Rheinmetall’s established launcher and command infrastructure with LIG D&A’s proven missile technology, the venture aims to fill a European shortfall in affordable, high-volume interceptors capable of countering glide bombs and rockets. If successful, it could diversify the group’s earnings away from its heavy reliance on land-vehicle programmes — and reduce the sting if MGCS ultimately falls apart.