Vincorion’s €1.2 Billion Backlog Shields It From the Sell-Off — For Now

German defence supplier Vincorion posts 40% Q1 revenue growth to €69M, but margin compression and negative cash flow drag shares 23% below analyst targets.

The paradox playing out at Vincorion is one that investors in high-growth defence contractors know all too well: booming order books and a stock that keeps sliding. The German supplier of critical components for the Leopard 2 battle tank, tactical energy systems and electric rescue hoists has just posted a 40% surge in first-quarter revenue to €69 million, yet its shares closed Friday at €21.10, down 4.44% on the day. That leaves the stock roughly 23% below Berenberg’s €26 price target — a gap that analysts say is justified only if the company’s margin trajectory improves.

Nearly 90% of Vincorion’s planned full-year revenue is already locked in. The order backlog has swelled to around €1.2 billion, with incoming orders nearly quadrupling to €149 million in the first quarter alone. That level of visibility is rare for any industrial company, let alone one operating in the volatile defence sector. Berenberg’s Lasse Stueben reiterated his “Buy” rating on May 7, pointing to the operational momentum as the core of his thesis. JPMorgan also maintains an “Overweight” stance, though analyst David Perry struck a more cautious tone, praising the top-line strength but flagging the margin compression as a concern.

The profit picture tells a different story. Adjusted EBIT margin slipped to 18.0% from 19.4% a year earlier, as post-IPO costs and a concentrated wave of research and development spending ate into earnings. Free cash flow turned negative, hitting minus €7.1 million, dragged down by tax payments and the working capital build needed to ramp up production. Management is expanding capacity across sites in Altenstadt, Essen and Wedel to meet demand, but the cash drain has rattled investors accustomed to the sector’s typically robust cash generation.

For the full year, the board still expects revenue of up to €320 million and a margin between 18% and 19%, with a medium-term target of around 20%. Whether that goal is achievable depends on how quickly Vincorion can convert its record order book into profitable deliveries. The current share price of €21.22 on Friday — down 3.72% on the day and 4.33% for the week — reflects the market’s scepticism. Yet with a relative strength index of 22.1, the stock is technically oversold, suggesting the selling may have run its course.

The 52-week high of €22.58 is still within reach, and the annualised volatility of nearly 66% means sharp reversals are part of the game. STAR Holdings SARL, the largest shareholder with a 47.53% stake, has little incentive to sell at these levels. At a market capitalisation of roughly €1.1 billion and a price-to-earnings ratio of 36.9, Vincorion is priced for growth — but with 90% of this year’s revenue already under contract, the risk of a sudden shortfall is low. The question now is whether the second half delivers the margin improvement needed to close the gap between the stock and its analyst targets.