TKMS: A Delivered Submarine Programme, a Canadian Order in the Wings, and a Share Price That Has Yet to Catch Up

TKMS handed over the last Dolphin-AIP submarine to Israel and lifted FY guidance, but its Fincantieri partnership remains unsigned.

TKMS has just closed the books on one of its most closely watched naval programmes. The handover of the INS DRAKON — the third and final Dolphin-AIP-class submarine — to the Israeli Navy marks the completion of the entire order, following the vessel's departure from the Kiel yard. For a company whose reputation rests on delivering complex underwater platforms on schedule, the timing of that final delivery carries weight well beyond the ceremony itself.

Yet the more consequential story for shareholders is not the milestone just passed, but the gap between what the order book now shows and what the market is willing to pay for it.

A backlog above €25 billion, and guidance moving in the same direction

The figures TKMS released on 12 August for the third quarter of fiscal 2025/26 make for uncomfortable reading if you happen to be short the stock. Revenue across the first nine months reached €1,890 million, up 19% year on year, while adjusted EBIT advanced 13% to €110 million.

Management responded by lifting its full-year outlook in no uncertain terms. Where 2% to 5% revenue growth had previously been guided, the company now expects 10% to 12%; the adjusted EBIT margin is targeted at up to 6.5%. The medium-term ambition of a margin above 7% was left untouched.

The order book tells a similar story. Counting the four MEKO A-200 DEU frigates, total backlog has pushed past €25 billion, against €20.1 billion on a pure group basis. That is revenue visibility stretching years into the future — which is precisely what makes the recent share price behaviour so difficult to square with the fundamentals.

Canada, Norway and a torpedo contract: the demand cycle in motion

Understanding the operational substance means looking at where the orders are coming from. In July, Canadian Prime Minister Mark Carney confirmed TKMS as the winning bidder for up to twelve submarines under the Canadian Patrol Submarine Project. The first four boats are slated for delivery in 2034, with contractual finalisation targeted no later than the end of 2027.

Norway, meanwhile, exercised an option for two additional 212CD-class submarines, expanding its fleet from four to six vessels. TKMS also signed a framework agreement with Germany's BAAINBw procurement office covering heavyweight torpedoes for that same submarine class.

On the partnership front, the company added a second letter of intent in July — this time with Spain's Navantia — aimed at deepening cooperation in the submarine segment. The stated goal is a binding cooperation framework for selected projects by the end of the year, following talks that both parties describe as having produced a clear division of complementary capabilities.

Set against that backdrop, the pattern looks less like a one-off surge and more like a structural demand cycle taking hold.

The Fincantieri question and the F127 design

Closer to home, the cooperation sketched out with Fincantieri in a letter of intent remains the pivotal variable for the equity story. Both companies have been explicit that no merger or takeover is on the table — what is being discussed is a structured partnership whose concrete shape is still undecided. Whether TKMS can convert that intent into a workable framework by year-end will go a long way toward determining whether it strengthens its European position in the submarine and underwater segment or settles for a looser arrangement.

Separately, the A400 FC GmbH project company led by TKMS continues to advance the design of the F127 air-defence frigate, pointing to extensive customer requirements in air defence and ballistic missile defence. The programme remains in its development phase; no construction contract is attached to it yet.

What the market is actually pricing

The share closed most recently at €83.70, down 1.3% on the prior session. Over the past month it has shed 13%, though it remains 26% higher since the start of the year. Annualised volatility of 52% says plenty about how jittery the trading has become.

The retreat has taken the stock well below its 52-week high of €108.80, set on 14 August — roughly 23% beneath that peak. Some of the euphoria that had been priced in around major contract awards has evidently been unwound.

Bernstein Research made a notable move in response to the 12 August numbers, upgrading the shares from Market-Perform to Outperform and raising its price target from €76 to €125. That call dates from the first half of August and should not be framed as a current market view — but it does illustrate how far the operational trajectory has shifted the fundamental valuation base, even as the share price has failed to follow.

Two paths from here

If TKMS converts the Fincantieri letter of intent into a durable cooperation framework before the year is out, it could cement its standing in the European submarine and underwater market without surrendering corporate independence. The punctual completion of the Dolphin-AIP programme underpins the case, demonstrating a track record for running complex build programmes to schedule — a reference that should serve the company well in future tenders. Add tangible progress on the F127 frigate design that culminates in a firm construction order, and an additional growth impulse emerges beyond the existing backlog.

The risk sits in the non-binding nature of early-stage cooperation. A letter of intent is not a contract, and a pledge to have a framework standing by year-end leaves open just how deep the collaboration would actually run. Should the Fincantieri talks stall or produce little more than symbolic gestures, the market is likely to read it as a disappointment. The F127 project, too, remains in the design stage — further rounds of negotiation typically separate conceptual progress from a signed build contract. And with the shares already 13% weaker over 30 days, a continued absence of concrete order wins from the announced partnerships and projects would probably extend that trend.

For now, the structural growth picture holds as long as TKMS delivers on its cooperation plans — above all with Fincantieri — within the stated timeframe, and shows visible movement on F127 toward a construction contract. The company has proved it can deliver. The real test lies in the ventures that remain, for the moment, unsigned.