KNDS Pushes Ahead With Factory Expansion as €3bn Valuation Gap Keeps IPO Grounded
Published on 08/03/2026 at 04:42 | Redaktion boerse-global.de
The order book at KNDS stands at a record €33.1bn, and the deutsch-französische defence group is spending that visibility on the factory floor rather than waiting for the capital markets to come around. Production lines in Kassel and Görlitz are being expanded and digitised even as the company's long-mooted dual listing in Frankfurt and Paris remains suspended.
Management's medium-term target of €11bn to €12bn in annual revenue rests on a pipeline that has been swelling across Europe as governments replenish land systems. The group — the alliance formed from Germany's Krauss-Maffei Wegmann and France's Nexter — logged sales of €4.4bn for 2025, up 15.9 percent, with EBIT of €661m (a 15 percent margin) and free cash flow of €980m.
Kassel and Görlitz Lead the Capacity Push
The Kassel site has become the hub for the group's flagship programmes, with Leopard 2 main battle tanks, Boxer armoured personnel carriers and Puma infantry fighting vehicles rolling off the lines. Beyond lifting unit volumes, KNDS is digitalising its manufacturing processes to compress the journey from development to series production — a response to rising European defence budgets and the urgent need to get combat-ready equipment into the hands of the Bundeswehr and allied forces.
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In Görlitz, the former railway works now employs 300 people as a modern defence plant, with headcount due to reach 400 by year-end. Management says it is evaluating additional sites to expand further, with an eye to strengthening the domestic defence industrial base and securing European supply chains over the long term.
The MGCS Question Looms
The operational momentum, however, sits alongside a strategic headache. The Main Ground Combat System — the Franco-German programme meant to replace the Leopard 2 and Leclerc — is losing pace. Reports from early August point to a growing risk to the original concept, with Paris and Berlin shifting toward "platform-independent technologies" rather than a shared chassis. That suggests a "system of systems" approach, and full operational capability of a joint combat system could slip into the early 2040s — roughly a decade behind schedule.
KNDS is the central joint venture and lead integrator for the programme, so the delays inject uncertainty into long-term product planning. The group has showcased interim solutions such as the Leopard 2 A-RC 3.0 to bridge the gap, but agreement on a common chassis remains elusive — a point of contention among defence analysts.
A Listing Held Hostage by Valuation
The strategic uncertainty collides with a stalled IPO. KNDS had planned a dual listing in Paris and Frankfurt for this summer but pulled the process in July 2026, citing high volatility in the European defence sector. The deeper issue is a valuation gap: owners were targeting around €15bn, while institutional investors signalled a ceiling of roughly €12bn.
That €3bn chasm reflects the broader sell-off in defence equities. Rheinmetall, a key competitor, has lost more than 30 percent of its value since the start of the year.
The German state's planned entry as a major shareholder is directly tied to the listing. The Bundestag's budget committee approved the acquisition of a 40 percent stake via KfW for up to €7.2bn, but that transaction is conditional on a successful flotation. Without a completed IPO, the ownership change remains blocked.
Solid Fundamentals, Pending Dividend Policy
Operationally, the group started 2026 on firm footing. Management is also planning a dividend policy with a payout ratio of 40 percent of net profit, with first payments expected in 2027 based on the current business year.
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For investors watching the defence sector, several factors could shape the window for a possible IPO revival — a resurgence is currently expected in September. The share price performance of European defence groups will offer early signals on stabilisation, as will ongoing NATO discussions on long-term procurement of ammunition and platforms. Any further clarity from Paris or Berlin on the "digital nervous system" or platform-independent research could shift institutional valuation models.
The sector is in a consolidation phase, with investors waiting for that valuation gap to narrow. In the meantime, KNDS is keeping the factories busy — and the order book speaks for itself.
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