How Almonty Industries, Rheinmetall, and RTX Are Driving the New Defense Supercycle—and Why the Correction Could Be an Opportunity

Almonty Industries: Start of Production and Long-Term Offtake Agreements

Almonty Industries has reached a milestone. With the start of processing at the Sangdong mine in South Korea, the company has transitioned from the construction phase to full-scale operations. Initially, approximately 140,000 metric tons of tailings with an average grade of 0.25% tungsten trioxide will be processed. At current prices, the value of the material is estimated at approximately USD 68 million. This is a significant figure, as it demonstrates the mine's potential when the material is processed at the normal average grade of 0.45%. The Sangdong Mine is one of the largest tungsten deposits in the world and, once fully ramped up, will make Almonty the largest producer outside of China.

The mine's significance is underscored by the revised offtake agreement with Global Tungsten & Powders. The term has been extended from 15 to 21 years, and the total volume has been increased by 40% to 4.41 million MTU. These improved terms are expected to boost annual revenue by at least USD 30 million. At the same time, this long-term offtake agreement also benefits the company's planning. The contract covers approximately 90% of Phase 1 production, thereby ensuring planning certainty well into the late 2040s. Next year, when the planned Phase 2 expansion is scheduled for completion, the facility will be able to process double the capacity without involving other sites.

The latest news regarding the company's capital market activities rounds out the picture. Its inclusion in the Russell indices at the end of June broadens access to institutional investors, while the delisting from the TSX and ASX makes it clear that the company intends to focus on NASDAQ trading. Analysts see significant potential in the stock and have recently issued multiple "Buy" recommendations. Diamond Equity Research has set a price target of USD 22.60. Cantor Fitzgerald sees a price target of USD 25.50. And D.A. Davidson expects as much as USD 33. That represents significant upside potential based on the current share price of approximately USD 12.56.

Rheinmetall: Record Revenue and Orders

Rheinmetall's preliminary second-quarter figures, announced by the company on July 29, significantly exceeded market expectations. Revenue jumped 69% to EUR 3.289 billion, exceeding even the company's own forecast from early July, which had projected an increase of around 60%. Operating profit more than doubled to EUR 562 million. In the previous year, it was just EUR 276 million. Here, too, the results exceeded analysts' expectations, which had been just under EUR 470 million. The operating margin improved to 17.1%, and the growth in the order backlog is particularly noteworthy, as it surpassed the EUR 80 billion threshold for the first time. From March through the end of June, orders totaling EUR 11.371 billion were received.

However, there are also some minor concerns. Operating free cash flow was significantly negative in the second quarter. There are two reasons for this. On the one hand, it is due to the timing of customer prepayments, and on the other hand, to massive inventory investments for the planned production ramp-up. However, this is not an unusual pattern for companies that are rapidly expanding their production capacities. The full half-year report will be presented on August 6 at 2:00 pm and will show whether the negative cash flow is merely a temporary phenomenon.

Several landmark decisions have been made in recent weeks. The ATACMS co-production with Lockheed Martin in Unterlüß, as well as the expansion of powder production in Aschau am Inn with an investment of approximately EUR 500 million, underscore the company's expansion strategy. The acquisition of DOK-ING and the US contract for autonomous ground vehicles expand the portfolio. However, there was also the cancellation of the F126 frigate project, which had a contract value of about EUR 20 billion. The final figures will show whether the 2026 annual forecast, with expected consolidated revenue between EUR 14 and 14.5 billion, is achievable and whether the production ramp-up can succeed without a decline in margins. The share is currently trading at around EUR 1,204.

RTX: Strong Quarterly Results

RTX's quarterly results, released on July 23, were strong. The aerospace group significantly exceeded market expectations with adjusted revenue of USD 24.7 billion and earnings per share of USD 1.89. Organic growth of 16% came primarily from three divisions: Collins Aerospace, Pratt & Whitney, and Raytheon. The operating margin increased by 0.4 percentage points and free cash flow stood at USD 2.9 billion. Analysts were impressed by this performance.

The Raytheon defense division delivered the strongest performance, with revenue up 18% and a 1% increase in margin. Order intake of approximately USD 20 billion, coupled with a book-to-bill ratio of 2.42, demonstrates how high the demand for air defense systems such as Patriot and AMRAAM still is. International customers, in particular, are ordering these systems and now account for 48% of the order backlog. At Pratt & Whitney, there are signs of a turnaround regarding the issues with the geared turbofan turbines. The number of grounded aircraft was reduced by 25%, while maintenance capacity was expanded by over 40%.

Backed by a record order backlog of USD 289 billion, the company has raised its full-year forecast and expects adjusted revenue of USD 95 to USD 96 billion and earnings per share of USD 7.10 to USD 7.25. The challenge remains the supply chain and working capital due to capacity expansions. It remains to be seen whether the pace of growth can be maintained in the second half of the year. However, the order backlog and the broad presence in the civil and military aviation sectors provide planning certainty. The share is currently trading at around USD 216.65.

The defense supercycle has now become a reality, driven by depleted ammunition stocks and ongoing geopolitical conflicts. Almonty Industries is securing the critical supply of tungsten outside of China with the start of production in South Korea and long-term purchase agreements. Rheinmetall, with record revenue and an order backlog of EUR 80 billion, is proof of the enormous momentum in demand, even if negative cash flow is weighing on the company in the short term. RTX shines with strong quarterly results and a record order backlog of USD 289 billion, with international customers contributing an increasing share.