Rheinmetall AG

: an equity valuation amid structural growth in the defense industry

Abstract

This dissertation presents an equity valuation of Rheinmetall AG, a German defense and technology group, recently transformed into a pure-play defense contractor. Motivated by Europe’s rearmament, record defense budgets, and Rheinmetall’s sharp share price surge, the study examines whether the company is fairly valued. The primary valuation approach is a Discounted Cash Flow (DCF) model, utilizing Free Cash Flow to the Firm (FCFF) and discounting it at the Weighted Average Cost of Capital (WACC). Complementary Relative Valuation, based on trading and transaction multiples of peers, serves as a benchmark; however, limited comparability reduces its relevance. The analysis builds on a financial forecast incorporating Rheinmetall’s €62 billion backlog, its expanding industrial footprint, and structural NATO demand. An explicit forecast and transition period capture near-term momentum and convergence toward steady-state growth. Sensitivity tests and Monte Carlo simulations assess the models’ robustness under varying assumptions. The DCF model yields an implied share price of €1,763, an upside of 9.6% relative to the market price, August 15, 2025. Relative Valuation suggests lower values, reflecting Rheinmetall’s unique position in European rearmament. Lacking comparability, the final target price relies on the DCF model, supporting a “Hold” recommendation. While near-term growth is robust, long-term prospects depend on sustained defense demand and effective program execution, requiring regular reassessment.

Date of Award	15 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)