Thyssenkrupp: A €60 Billion Submarine Prize and a Steel Mill Departure Frame a New Identity

JPMorgan lifts price target to €12.80, citing Canada's historic submarine contract, a €6.3B frigate order, and the exit from HKM steel joint venture. Neutral rating maintained amid portfolio overhaul.

JPMorgan has lifted its price target for Thyssenkrupp to €12.80 from €11.80, maintaining a Neutral rating, as two transformative events unfold simultaneously: a historic submarine mandate from Canada and the final exit from the HKM steel joint venture. The bank’s analyst, Dominic O’Kane, cited rising protection for European steel and expects second-half price improvements, though he stopped short of predicting surprise profits from the current earnings season. The upgrade came on the same day the Bundestag’s budget committee approved a €6.3 billion frigate contract for the group’s naval arm, cementing a week of blockbuster orders and strategic shedding.

Canada has selected Thyssenkrupp Marine Systems (TKMS) as its partner for a national submarine program, marking the largest naval contract in the company’s history. The deal covers up to 12 boats of the 212CD class, with a direct construction volume of around €20 billion. Over the full lifecycle—including maintenance, training, and infrastructure—the project could be worth as much as €60 billion. The contract is expected to be signed by the end of 2027, with the first submarine delivery planned for 2034. Until then, the agreement remains a letter of intent, albeit one carrying billions in potential firepower.

The German frigate order, approved on July 8, adds further heft to TKMS’s order book. Four MEKO A-200 DEU anti-submarine frigates come at a cost of €6.3 billion, replacing the earlier, stalled F126 project. A separate option for four additional frigates worth roughly €5.3 billion still requires parliamentary approval. However, the contract comes with strings attached: TKMS must prioritise shipyard locations and subcontractors that lost work after the F126 cancellation, which could squeeze margins on the initial batch.

Alongside the naval moonshot, Thyssenkrupp is pressing ahead with its long-running breakup. On the same day the frigate deal was approved, the group formally signed an agreement to sell its entire stake in Hüttenwerke Krupp Mannesmann (HKM) to Salzgitter. Both Thyssenkrupp Steel Europe and Vallourec are exiting the joint venture, leaving Salzgitter as the sole owner. The supply contract tying HKM to Thyssenkrupp Steel will now expire in 2028, four years earlier than originally scheduled. Steel-Europe chief Marie Jaroni described the move as a pivotal milestone, allowing the company to concentrate production in northern Duisburg and improve utilisation. The workforce at HKM, currently around 3,000, is expected to shrink to roughly 1,000 over time. Neither side has disclosed the financial terms of the separation.

The reshaping of the portfolio will come to a head at an extraordinary general meeting on August 7, 2026, when shareholders vote on the planned spin-off of the materials division, TK Accelis. That unit, which supplies specialty metals and alloys, is set to become an independent company, consistent with Thyssenkrupp’s strategy of breaking itself into smaller, more focused entities. The spin-off mirrors the earlier carve-out of the steel business and the continued push to hive off non-core operations.

The market reaction to the flurry of news has been mixed. Thyssenkrupp’s stock closed at €11.50 on Friday, a gain of 1.72% on the day, yet it posted a weekly decline of 6.73%. The short-term sell-off suggests investors are weighing the long lead times of the submarine deal—binding signature still 18 months away—against the immediate costs of restructuring and the mandated inclusion of former F126 subcontractors. Broader concerns over rising raw material prices, especially tungsten, and potential state control over strategic defence projects also hang over profitability.

Nevertheless, the longer-term technical picture remains intact. The shares have climbed 18.90% since the start of the year and stand 4.36% higher than a year ago. At €11.50, they trade 15.47% above the 200-day moving average and 4.58% above the 50-day average of €11.00. The 52-week high of €13.24, reached in October 2025, is still about 13% away, while the relative strength index of 54.7 points to a neutral zone—neither overbought nor oversold. With a market capitalisation of just over €7 billion, the conglomerate is valued at a fraction of the potential revenue from its naval pipeline, but execution and timing will determine whether that gap narrows.