German Defense Stocks Rally Continues Amid Ongoing Ukraine War

German defense stocks, including Rheinmetall, Renk, and Hensoldt, continue to rally amid ongoing conflict in Ukraine. Rheinmetall's share price approaches €2,000, and Hensoldt rises over 10% after a JPMorgan recommendation. The war in Ukraine drives investor interest, with defense spending expected to increase in the UK.

German defense stocks, including Rheinmetall, Renk, and Hensoldt, have seen significant gains in recent weeks, driven by the ongoing conflict in Ukraine and increased government spending commitments. J.P. Morgan analysts have raised their price targets for these companies, citing strong financial performance forecasts and increased military spending.

Rheinmetall, a leading German defense company, has seen its share price approach €2,000, reflecting a 11% upside from its current level. J.P. Morgan has maintained its price target at €2,100, implying a continued bullish outlook on the company's prospects [1].

Hensoldt, another German defense firm, has seen its share price rise over 10% after J.P. Morgan raised its price target to €110 from €50. The brokerage cited Hensoldt’s strong sales and margin forecasts, with organic sales projected to grow at a 16% compound annual rate through 2030, and EBITA margins rising from 13.2% in 2024 to 15.3% in 2030 [1].

Renk Group AG has also seen its price target increased by 25% to €87.5. The company is expected to see its margin expand from 16.6% in 2024 to 21.3% in 2030. J.P. Morgan has applied the same valuation framework to Renk as it has for Rheinmetall, including a 2030 estimated price-to-earnings multiple of approximately 23x and a free cash flow (FCF) yield of about 4% [1].

The increased focus on defense spending is not limited to Germany. The UK is also planning significant investments in its defense industry. The British government has announced plans to spend at least £3 billion on long-range weapons, housing facilities, and arms factories as part of a major defense review [2]. This comes amid a broader push in Europe to revitalize defense sectors, with the EU planning to unlock up to €800 billion in new military spending [2].

The conflict in Ukraine has also driven investor interest in defense stocks. The war has led to increased military spending and a focus on defense capabilities. J.P. Morgan analysts have noted that the revaluation of defense stocks reflects long-term earnings visibility and strong cash flow expectations tied to increasing global defense budgets [1].

References:
[1] https://www.investing.com/news/stock-market-news/jp-morgan-lifts-targets-on-european-defense-stocks-amid-spending-push-4074741
[2] https://www.politico.eu/article/uk-billions-defense-weapons-arms-splurge-war-moscow-russia-putin-healey-starmer/