TKMS: A Frigate Design Takes Shape as Two Submarine Mega-Deals Hang in the Balance

TKMS and Rheinmetall push F127 frigate design forward, while Canadian and Indian submarine decisions could add to a EUR 20.1 billion backlog.

TKMS has pushed its design work on a new air-defence frigate class well beyond the drawing board, advancing the F127 programme together with Rheinmetall. The two partners are building on the MEKO A400 platform, extending it with long-range air-defence capabilities and the ability to intercept ballistic missiles.

Responsibility for the project sits with A400 FC GmbH, a joint venture in which both companies hold stakes. According to the companies, roughly 90 percent of the value creation will take place in Germany. Should a contract come through promptly, TKMS believes a first delivery could be possible by the mid-2030s — a long horizon that underscores the planning certainty the programme would offer the Kiel shipyards and their supplier network.

No firm order for the F127 exists yet; the effort remains in its design and concept phase. Even so, the scale of the industrial footprint implied by those value-creation figures and the extended delivery timeline suggests a project of considerable depth. For investors, the development matters chiefly as a signal that TKMS intends to gain ground beyond submarines in surface vessels equipped with sophisticated air-defence systems, pooling shipbuilding know-how with Rheinmetall's weapons expertise.

Two Decisions That Could Reshape the Order Book

While the frigate takes shape, TKMS is waiting on a pair of procurement calls that could swell an already record backlog. In Canada, Prime Minister Mark Carney confirmed during a meeting with Chancellor Friedrich Merz in Berlin roughly two and a half weeks ago that TKMS remains in contention for the Canadian Patrol Submarine Project, which envisions as many as twelve Type 212CD boats. A decision is expected before the end of the year, though rival bidders have not dropped out.

In India, meanwhile, the P-75I programme is weighing the TKMS design for six fuel-cell-powered submarines, to be built by Mazagon Dock. The estimated volume runs to about EUR 6.4 billion. Before any final approval, the responsible security committee must still give its blessing — meaning a signed contract is not yet in hand.

Any awards would land on top of an order book already at historic highs. After nine months of fiscal 2025/26, TKMS reported a backlog of EUR 20.1 billion, with revenue up 19 percent to EUR 1.89 billion and adjusted EBIT ahead 13 percent at EUR 110 million. Management responded by lifting its full-year guidance for the second time, now pointing to revenue growth of 10 to 12 percent, up from an earlier 2 to 5 percent.

Analysts at mwb research offered a sense of how much weight that backlog can carry: the firmly contracted EUR 20.6 billion equals 9.5 times annual revenue, while a broader, sector-wide definition could put the figure near EUR 64 billion. The firm reiterated its buy rating with a price target of EUR 140.

Operational Strength, Muted Sentiment

The stock has yet to reflect that momentum. TKMS closed Friday at EUR 83.40, down 13 percent over the past month and roughly 23 percent below its 52-week high of EUR 108.80, set on 14 August. An RSI of 41 points to neither overbought nor oversold territory, and annualised volatility of 50 percent marks the shares as prone to sharp swings — characteristic of defence names in a period of geopolitical reassessment.

There has been no single piece of bad news behind the recent pullback; it reads more as consolidation following the strong rally of previous months. Sentiment across the sector has also been weighed down by media reports of delivery delays and quality problems in the German defence industry at large. Those reports do not concern TKMS directly, but they appear to be dampening enthusiasm for the industry as a whole.

Year-to-date, the picture is brighter: the shares are still up 26 percent since the start of the year. What happens next may hinge on whether the F127 design converts into a firm order before long, and on whether Canada and India deliver the multi-billion-euro awards the company is positioning for. Until then, the frigate remains above all a strategic statement — TKMS and Rheinmetall staking out a role as suppliers of complex air-defence solutions to the German and European navies, in a market where defence budgets across several European states are climbing noticeably.