TKMS: Hedge Fund Short Interest Casts a Shadow Over a Submarine-Fueled Rally

TKMS stock gains 38% YTD but Marshall Wace shorts 0.60%. Record order book of €20.1B and raised guidance fuel optimism, yet cash flow turns negative.

The German naval shipbuilder has spent the past several months stacking up contract wins from Ottawa to New Delhi, yet not every market participant is convinced the shares can hold their altitude. Marshall Wace, the London-based hedge fund, has disclosed a net short position of 0.60 percent in TKMS stock, according to the German Federal Gazette — a modest bet that the recent run-up has gotten ahead of itself.

The shares currently trade at around 91 euros, having gained roughly 38 percent since the start of the year. That still leaves them about 16 percent below the 52-week high of 108.80 euros touched in mid-August, and comfortably above the 200-day moving average of 83 euros.

The India Question Looms Large

What keeps the bulls engaged is a pipeline of potential deals that spans multiple continents. Reports have circulated that negotiations over six conventional submarines for India under Project 75I are nearing final approval from New Delhi's security cabinet. The program carries a price tag of roughly $7.3 billion and would be executed locally in partnership with Mazagon Dock Shipbuilders. Nothing has been confirmed, and the reports remain unverified.

More tangible progress has come from Canada, where CEO Oliver Burkhard confirmed in early July that TKMS had been selected as preferred bidder for up to twelve submarines. Final contract talks are expected to stretch over the coming months, with a deal targeted by the end of 2026. The vessel volume alone is said to exceed 15 billion euros.

The company has also been busy closer to home. A framework agreement with Spain's Navantia, signed in late July, aims to ease potential capacity bottlenecks as the order book swells. In Germany, TKMS inked a contract for four MEKO A-200 DEU frigates with an option for four more — described as the largest surface-vessel order in company history. Norway, meanwhile, ordered two additional 212CD submarines, bringing its total to six.

The Numbers Behind the Optimism

The fundamental case rests on the nine-month figures released in mid-August. Revenue climbed 19 percent to 1.89 billion euros, while adjusted EBIT rose 13 percent to 110 million euros. The order book hit a record 20.1 billion euros, with a book-to-bill ratio of roughly two times revenue.

The submarine segment did the heavy lifting: revenue there rose 18 percent to 1.001 billion euros, while segment EBIT quadrupled to 46 million euros. Atlas Electronics grew revenue 28 percent to 612 million euros with EBIT up 31 percent. Surface Vessels lagged, posting a stable 30 million euros in EBIT on an 11 percent revenue increase.

Management raised its full-year guidance for the second time, now projecting revenue growth of 10 to 12 percent, up from an earlier 2 to 5 percent range. The adjusted EBIT margin is expected to reach around 6.5 percent, with absolute adjusted EBIT still seen between 100 and 150 million euros. The medium-term targets remain annual revenue growth of roughly 10 percent with an EBIT margin above 7 percent.

Analysts Turn More Confident

The combination of contract momentum and raised guidance prompted Bernstein Research to upgrade the stock in mid-August from "Market-Perform" to "Outperform," lifting its price target from 76 to 125 euros. Analyst Adrien Rabier cited an 86 percent upward revision to his 2030 EBIT estimate. Deutsche Bank also raised its target to 112 euros while keeping a "Buy" rating.

For parent Thyssenkrupp AG, which still holds 51 percent of TKMS, the third quarter of 2025/26 brought revenue of 8.8 billion euros, up 8 percent year on year.

Not Everything Points Upward

The short position from Marshall Wace is small enough that it hardly constitutes a vote of no confidence in the underlying business. It reads more like a technical hedge — a view that the shares may need to consolidate after a sharp run, without challenging the fundamental growth story.

There are, however, some numbers that give pause. Free cash flow swung to minus 204 million euros over the first nine months, versus plus 631 million euros a year earlier, as investments and customer prepayments from the 212CD program weighed. Order intake fell to 3.617 billion euros from 8.598 billion euros, though that largely reflects a tough comparison against a major 212CD contract booked in the prior-year period.

Strategically, TKMS walked away from the takeover tussle over German Naval Yards Kiel in late July, citing an inability to agree on economic terms with the owners. The company now plans to prioritize organic capacity expansion at its Wismar site, where up to 1,500 new jobs are slated by 2029 for hybrid production of submarines and frigates. CEO Burkhard has also pointed to fresh demand from the Gulf region for mine-countermeasure capabilities in the wake of the Iran conflict.

Investors will get the next read on the story on December 7, when TKMS publishes its full-year results for 2025/26 — the moment of truth for whether that upgraded guidance can be delivered.