Rheinmetall’s €350 Million Powder Bet: Can New Orders Fill the F126 Hole?

Rheinmetall launches Europe’s most advanced propellant powder factory in Aschau am Inn, doubling capacity to 4,200 tonnes by 2028, while signing major deals with Thales, Lockheed Martin, and the British Army.

The ground has been broken in Aschau am Inn, where Rheinmetall is building one of Europe’s most advanced propellant powder factories. The “Firepower” project, which will double annual capacity to 4,200 tonnes by 2028, represents a €350 million investment by the Düsseldorf-based defence group, with the total project cost reaching €650 million. The expansion comes at a moment when the company is simultaneously announcing a flurry of new contracts — and grappling with a significant revenue setback that has left its share price trading well below last year’s highs.

A Week of Deal-Making

The ground-breaking ceremony capped a remarkably busy period for Rheinmetall’s deal flow. Just beforehand, the group signed a comprehensive framework agreement with Thales covering the supply of optronic sighting systems for multiple vehicle platforms. The German armed forces, meanwhile, drew down €100 million in hardware and support services from the existing “Digitalisierung Landbasierte Operationen” (Digitalisation of Land-Based Operations) framework contract.

Mid-July brought a memorandum of understanding with Lockheed Martin for the European co-production of the ATACMS missile system at Rheinmetall’s Unterlüß site, a move designed to strengthen NATO supply chains. At the same location, the first batch of newly manufactured 155-mm artillery shells — a low five-figure quantity — left the factory for Ukraine. Earlier in July, an unnamed international customer placed an initial order for four Skynex air-defence systems plus a logistics package, valued at several hundred million euros.

Across the Channel, the British Army awarded a contract worth nearly €1 billion to digitalise combat training, while British military personnel are also being trained in autonomous logistics operations ahead of major international exercises. Germany’s BAAINBw procurement office handed Rheinmetall overall responsibility for the InterRoC VII research project, which aims to develop autonomous military convoys. In the maritime domain, the group struck a cooperation agreement with Norway’s Space Norway for joint space-based maritime surveillance.

The Shipyard That Got Away

Not every headline was positive. Talks over the sale of the German Naval Yards Kiel shipyard by ThyssenKrupp Marine Systems collapsed without agreement on commercial terms, according to WELT. Rheinmetall, which had been involved as a potential co-bidder, now exits the process empty-handed.

Analysts Dial Back Their Enthusiasm

The wave of contract announcements has done little to shield Rheinmetall from a more cautious assessment on the sell side. Bank of America cut its price target on 18 July from €1,770 to €1,300, maintaining a “Buy” rating but citing a more conservative long-term forecast for ammunition sales through 2030. In a separate note on 21 July, the same bank reiterated the lower target, this time pointing to concerns about the group’s portfolio mix — arguing that Rheinmetall is too heavily weighted toward conventional munitions at a time when demand is shifting toward drone defence and precision systems.

Jefferies analysts, after examining dynamics in the European defence sector on 10 July, also reaffirmed a Buy recommendation with a €1,300 price target. Both houses still see upside, but the gap between their targets and the current share price has narrowed considerably.

A Stock Caught Between Recovery and Reality

Rheinmetall’s shares have shown some resilience in recent days. The stock gained 2.39% on Thursday to close at €1,038.40, and has recovered 8.14% over the past seven trading sessions. That bounce has been helped by a positive sector tailwind after strong first-half results from European peers Dassault Aviation and Thales.

Yet the broader picture remains sobering. Over the past 30 trading days, the shares have lost roughly 12% — a sign that the steady drumbeat of positive contract news has not been enough to sustain upward momentum. The main overhang is the ad-hoc disclosure from 2 July, in which Rheinmetall warned of potential revenue shortfalls of up to €300 million for the full year 2026 following the cancellation of the F126 frigate programme. The company did confirm its second-quarter revenue target, which implies growth of more than 60%.

The August 6 Reckoning

All eyes are now on 6 August, when Rheinmetall publishes its second-quarter interim report along with a detailed update to its full-year guidance — the first since the F126 programme was scrapped. Investors will be scrutinising whether the raft of new orders — from Skynex and ATACMS to the Unterlüß ammunition production and the Aschau powder plant — can offset the €300 million hole left by the frigate cancellation. The answer will determine whether the stock’s recent recovery has legs, or whether the market’s scepticism runs deeper than any single contract win can fix.