Rheinmetall’s Bavarian Powder Gamble: Groundbreaking Ceremony Collides With Analyst Doubts and Chinese Curbs

Rheinmetall expands ammunition capacity with a €500M Bavarian plant, but faces analyst skepticism, a major contract loss, and new Chinese export controls.

The Düsseldorf-based defence contractor pressed ahead with its expansion plans on Thursday, breaking ground on a €500 million powder plant in Aschau, Bavaria, even as two analysts sharply revised their outlook on the stock and Beijing slapped export controls on the company. The juxtaposition of a ceremonial spade in the ground with a deteriorating analyst consensus captures the tension between Rheinmetall’s long-term ambitions and its near-term market challenges.

The Aschau facility is designed to produce more than one million propellant charge modules annually, making it a cornerstone of the group’s drive to ramp up ammunition output since the outbreak of war in Ukraine. Current annual production of 1,700 tonnes of propellant powder is set to climb to 4,200 tonnes by 2028, with the workforce expanding from 800 to 1,300 employees. Rheinmetall’s ultimate target is 20,000 tonnes of annual capacity by 2030, enough to supply the Bundeswehr, NATO and EU partners. The investment forms part of a broader €650 million programme, though the company’s own figure for the Aschau site stands at €500 million.

The expansion comes hard on the heels of other operational milestones. Earlier this month, Rheinmetall delivered 155mm artillery shells from a new plant in Unterlüß, Lower Saxony, to Ukraine for the first time. Days later, a NATO member state placed an additional order for Ukrainian-bound artillery ammunition valued in the mid-double-digit millions. The Bundeswehr also recently drew down €100 million in hardware and support services from the existing framework contract for digitising land-based operations.

Yet the operational drumbeat has been drowned out by a chorus of analyst scepticism. Jefferies analyst Chloe Lemarie slashed her price target on Wednesday from €1,890 to €1,300, a cut of more than a third, while maintaining a “Buy” rating. She cited a 20% reduction in her 2030 revenue forecast, which now sits below the company’s own target. More dramatically, an analyst at mwb-Research withdrew his buy recommendation entirely, blaming the loss of the F126 frigate programme to Thyssenkrupp Marine Systems — a surprise award that had already sent the stock to a yearly low in late June.

The F126 setback prompted board members to put their money where their mouth is. CEO Armin Papperger and supervisory board member Andreas Georgi bought shares through their respective holding companies at prices between €953 and €955, a gesture investors interpreted as a vote of confidence. The mood brightened further when Rheinmetall’s Spanish subsidiary, Rheinmetall Expal Munitions, secured a large order for long-range 155mm artillery shells for Ukraine, valued in the high double-digit millions.

Beijing added its own twist on Friday, imposing export controls on Rheinmetall and 13 other European companies. The restrictions target dual-use goods — technology with both civilian and military applications — in retaliation for a new EU sanctions package against Russia that also names Chinese and Hong Kong firms. Exemptions remain possible, and the EU is reviewing countermeasures. The market shrugged off the news: the stock closed at €1,032.60 on Friday, up 1.29% on the day. Investors appear to view the Chinese move as a sideshow compared with the operational story.

That story, however, has not been enough to arrest the share price decline. The stock remains 33.49% lower since the start of the year and trades roughly 31% below its 200-day moving average of €1,493.97. The 52-week high of €2,007, set on 3 October, now looks distant. The price-to-earnings ratio of 104.62 on a trailing basis underscores the lofty expectations baked into the valuation, even as the order book provides a cushion: the group’s backlog stood at €73 billion at the end of the first quarter.

Investors will get their next reality check on 6 August, when Rheinmetall publishes its second-quarter and first-half results. The numbers will reveal whether the billions poured into munitions capacity and digitalisation are translating into revenue and margin growth. A presentation at the DZ Bank Expert Day later in August should offer further strategic colour. For now, the market is weighing a €500 million bet on artillery powder against a lost frigate contract, Chinese export curbs and a stock that has shed a third of its value this year.