Rheinmetall's Production Pact Aims to Bridge the Valuation Gap

Rheinmetall shares are trading nearly 25% below their September peak, a disconnect that grows more pronounced with each new strategic deal. The latest move, a joint venture with Dutch firm Destinus, underscores the defense giant's push to dominate the era of volume-based warfare. The partnership, named Rheinmetall Destinus Strike Systems, is squarely focused on the industrial-scale production of cruise missiles and ballistic rocket artillery.

The venture, slated to begin operations in the second half of 2026 pending regulatory approvals, will be based in Unterlüß, Lower Saxony. Rheinmetall holds a 51% stake, with Destinus owning the remaining 49%. The alliance combines Destinus's platform designs with Rheinmetall's established manufacturing capacity. Destinus already produces over 2,000 cruise missile systems annually, some of which are deployed in the war in Ukraine. The companies see a long-term market opportunity potentially reaching into the billions of euros.

This deal fits a clear pattern for CEO Armin Papperger, who is rapidly expanding the firm's European industrial base through targeted alliances. It marks the third major partnership announced in quick succession. Earlier in 2026, Rheinmetall established a laser weapons joint venture with MBDA and struck a cooperation deal with Anduril Industries for the Barracuda cruise missile and the YFQ-44 Fury combat drone. A separate collaboration with Boeing Australia for the MQ-28 Ghost Bat drone system further illustrates the strategy.

Should investors sell immediately? Or is it worth buying Rheinmetall?

Despite this operational momentum, the equity has struggled. Trading around €1,496, the stock is down nearly 8% for the month and has slipped below its key 200-day moving average. Since the start of the year, it has declined almost 7%. This technical weakness stands in stark contrast to the company's formidable fundamental strength.

The order backlog reached €63.76 billion at the end of 2025, a 36% increase year-over-year. For the full 2026 financial year, management anticipates sales between €14.0 billion and €14.5 billion, representing growth of 40% to 45%. The operating margin is expected to be around 19%. Crucially, approximately 91% of the targeted revenue is already covered by existing orders, providing exceptional visibility.

The next catalyst for investors arrives on May 7, 2026, with the release of first-quarter figures. Five days later, on May 12, the annual general meeting in Düsseldorf will vote on a proposed dividend increase to €11.50 per share. The market will be watching to see if the company's operational execution can finally command a higher valuation.

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