Close menu




March 25th, 2022 | 13:13 CET

Defense Metals, Hensoldt, Rheinmetall - Special boom for the defense industry

  • RareEarths
  • armaments
Photo credits: pixabay.com

The war in Ukraine is giving the defense industry more weight. But what is the focus? Defense, deterrence, or war of aggression? The shares of industry representatives have recently benefited significantly from higher defense budgets and orders. What one thinks of this from a moral point of view is another matter. On a more sober note, stronger demand and earnings growth lay the groundwork for higher share prices.

time to read: 3 minutes | Author: Carsten Mainitz
ISIN: DEFENSE METALS CORP. | CA2446331035 , HENSOLDT AG INH O.N. | DE000HAG0005 , RHEINMETALL AG | DE0007030009

Table of contents:


    Defense Metals - Rare earth metals for armaments

    In addition to electromobility and the energy transition, the defense industry is another sector with a high demand for so-called rare earth metals ("rare earths"). The name is misleading. The deposits of the 17 rare earth metals are larger than those of many other metals. However, they do not occur in concentrated form alone or as ores but are bound in combination and at low levels in minerals. Because of this, and also because of similar chemical properties, their separation is very labor-intensive. China dominates the world market by a wide margin.

    Rare earth metals are used, for example, in the production of permanent magnets or battery storage systems. Due to the surge in demand in the wake of the energy transition and distortions in the supply chain caused by the global corona pandemic, the dependence on China has been painfully felt by many countries. Alarm bells rang in the defense industry in particular. Here, rare earth metals are indispensable for missile guidance systems, radar systems and satellite technology.

    There is a struggle to restart production chains of rare earth metals in other countries. For example, the US government has funded MP Metals, a US company, with about USD 6.95 billion to restart refining rare earth oxides extracted from the only mine in production in North America on US soil starting in 2022.

    Another pioneer specifically targeting the defense industry is Canada's Defense Metals. According to a Preliminary Economic Assessment (PEA), its Wicheeda project, located in a well-known mining region in British Columbia, has the potential to become a globally significant deposit of rare earth metals.

    The PEA released in November 2021 indicated a project value (after tax) of CAD 516.5 million, with a mine life of 19 years. The Company has since released additional drill results that should increase resource estimates, further extending the mine life and thus increasing the project value. The Company has a manageable market capitalization of CAD 45 million.

    Hensoldt - German defense specialist in stock market frenzy

    Since the invasion of Ukraine by Russian troops on February 24 and the subsequent announcement by the German government of a special fund of EUR 100 billion for the modernization of the German armed forces, the share price of listed German defense companies has known only one direction: north.

    A well-known representative is Hensoldt, which was created from the former radar division of Airbus and has its headquarters in the Bavarian capital of Munich. Although profit-taking set in for a short time last week, the rally continues. The papers have already gained more than 130% in the last four weeks.

    The next step is to permanently overcome the psychologically important EUR 30 mark. Analysts have raised their forecasts given the emerging flood of orders. JPMorgan, for example, raised its price target from EUR 22.50 to EUR 30 based on a profit forecast for the years 2023 to 2025 that is up to 53% higher and upgraded the stock to "Overweight".

    Rheinmetall - Analysts see further share price potential

    The Düsseldorf-based manufacturer of ammunition and heavy war equipment is seen as one of the biggest potential beneficiaries of the special fund planned by the German government. According to CEO Armin Papperger, the Group is well prepared for the coming flood of orders. The Group can currently deliver an equipment package worth EUR 42 billion to the German government. This package includes munitions, helicopters and heavy tracked and wheeled tanks.

    In addition to the emerging growth in profits, another factor should speak in favor of an investment in defense companies: a discussion has currently flared up as to whether shares in war equipment manufacturers can be classified as "sustainable" in the future. The Swedish SEB Bank is already moving ahead and has announced that it will lift the ban on investment in defense companies from April. Analysts are convinced by the Düsseldorf share. Bank of America formulates a target price of EUR 220, and Warburg Research sets the target zone at a similarly high level of EUR 210.


    An investment in the defense sector is a moral question that everyone must answer for themselves. From an economic point of view, good returns are possible here in the near future; groups such as Hensoldt and Rheinmetall are among the profiteers. Defense Metals is also promising. The Canadians have the potential to become an urgently needed producer of rare earth metals.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author



    Related comments:

    Commented by Stefan Feulner on February 1st, 2023 | 18:17 CET

    Rheinmetall, Defense Metals, Lynas - Time is running out!

    • Mining
    • Tungsten
    • RareEarths
    • Defense

    Heavy weapons for peace. Tanks, submarines and fighter jets for Ukraine, whatever the cost. This scenario is the bitter reality right now and is being promoted across the board by Western politicians. It may not sound very understandable, but in order to guarantee peace, the world continues to arm itself. Companies in the armaments industry, now declared to be sustainable investment opportunities, are booming. With the seething conflict in Taiwan, tensions are again on the rise. With its raw materials, such as rare earth metals, China has the power to act. The West is frantically trying to reduce dependencies, which is impossible to achieve in the short term.

    Read

    Commented by Fabian Lorenz on January 31st, 2023 | 14:48 CET

    Energy transition price rockets: American Lithium, Plug Power, Auxico Resources

    • Mining
    • RareEarths
    • Lithium
    • hightech

    Are shares related to electromobility among the price rockets of 2023? In any case, the start of the year was promising. After a partially disastrous second half of 2022, many stocks are showing strength in the new year. Lithium shares, in particular, are in demand again. Among the high flyers of recent months is American Lithium. After the Nasdaq listing and the planned spin-off of the uranium division, investors are eagerly awaiting the feasibility study. Will the share price fireworks continue? Analysts also expect such fireworks at Auxico Resources. They believe that the share price of the trader of rare earths and critical raw materials could almost triple. Hydrogen pioneer Plug Power has also bounced back in the new year. But once again, the US company has disappointed operationally. How do investors react?

    Read

    Commented by Juliane Zielonka on January 26th, 2023 | 20:10 CET

    Freyr Battery, Auxico Resources, Plug Power - Rare earth battery boom in e-Mobility

    • Mining
    • RareEarths
    • fuelcell
    • Electromobility

    One of Norway's largest financial services companies is increasing its equity stake in Plug Power, the US hydrogen fuel cell company. The reason: Nikola Motors has selected the Company to upgrade its new e-mobility fleet with clean fuel cells. Freyr Battery also has similar ambitions. Here, Impact Clean Power Technology, the Polish manufacturer of battery systems for heavy-duty vehicles, has signed an agreement with Freyr to purchase clean batteries. Both big deals have one thing in common: demand for rare earths and valuable metals to make green technologies a reality. That is where Auxico Resources, a mineral exploration company focused on Africa, comes in.

    Read