Rheinmetall, Volatus Aerospace, RENK – Defense boom gets a boost from the war in the Middle East!

Rheinmetall – Full order books

The Düsseldorf-based defense company Rheinmetall continues to demonstrate strong operational momentum. Despite increased geopolitical risks, such as recent tensions in the Middle East and certain headwinds in the possible acquisition of Iveco's defense division, the Company is supported by a steady stream of significant orders. A recent highlight is a five-year contract worth USD 107.5 million for military-tracked vehicles awarded to the US subsidiary. These robust T-158 tracks are essential for the Abrams tank and highlight the US Army's confidence in Rheinmetall's delivery capability and manufacturing excellence. Production will take place at the US plants in Michigan and Ohio, where capacity has been specifically expanded.

In parallel with its core defense technology business, Rheinmetall is reporting successes in the civilian sector. A well-known North American commercial vehicle manufacturer has placed a double-digit million order for CWA 2000 high-voltage coolant pumps. These key components for thermal management will be used in electric trucks starting in 2028. The versatile pump impressed with its durability, high voltage resistance, and integrated safety systems. This victory significantly strengthens Rheinmetall's position in the growing market for electrification components for heavy commercial vehicles.

Rheinmetall's strategic importance is reflected in a record order backlog of over EUR 60 billion. This is fueled by rising defense budgets worldwide and the acute need for ammunition. The South African ammunition subsidiary Rheinmetall Denel has just received two significant orders in the high double-digit million range for 155 mm shells with increased range. Unabated global demand is driving continuous production expansion and technological developments. For investors, Rheinmetall remains a key player in a structurally growing market, even if the current valuation already factors in much of its future success.

Volatus Aerospace – Focusing on data analysis and critical infrastructure

What began a decade ago as a toy has developed into a billion-dollar growth market. Today, drones are high-precision aircraft with ultra-HD optics and AI-controlled pattern recognition. Networked via ground stations, they act as flying sensors in real-time. They offer a cost-effective alternative to conventional methods, especially for monitoring critical infrastructure – around the clock and in all weather conditions. This is where Volatus Aerospace comes in. The Canadian company has established itself as a specialized service provider since 2018 and leverages its concentrated expertise in aviation technology and data analysis for civil and military customers. In addition to drones, the Company also has manned and unmanned aircraft.

Volatus scores with a comprehensive service portfolio. From inspecting dilapidated bridges and pipelines to precise terrain surveying and border surveillance, the agile aircraft deliver valuable data. Highly sensitive cameras, including thermal imaging technology, capture the smallest details. The subsequent analysis of the information is crucial. Volatus develops digital twins for this purpose, which make changes visible over time and enable predictive maintenance. After the transition year 2024, the focus is now clearly on software and services, which are more profitable than pure hardware sales. Currently, about half of sales come from this dynamically growing area.

The future opportunities are diverse. Increasing safety requirements and the investment backlog in public infrastructure are driving demand. Partnerships, such as with the US delivery service DroneUp, are opening up new logistics markets. At the same time, Volatus is leveraging Canada's progressive regulation as a competitive advantage and expanding internationally, with Volatus Aerospace Europe AS established in Norway. Artificial intelligence will further accelerate automated data analysis. With a diverse and growing pipeline, the Company is well-positioned to benefit from the structural growth drivers in the aviation market, especially the drone market. The share price has risen significantly recently and is currently trading at CAD 0.205.

RENK – Between soaring highs and valuation doubts

RENK shares have taken investors on a breathtaking rollercoaster ride this year. A massive rise of over 250% since January was recently followed by a significant correction. This volatility reflects the heated debate surrounding the valuation of the Augsburg-based specialist for drive systems. While some analysts criticize the prices as overheated, others see long-term potential. The fundamental question is whether the recent setback represents a healthy consolidation or the start of a more sustained revaluation.

RENK's operations are convincing. The first quarter of 2025 brought in revenue of EUR 273 million and earnings per share of around EUR 0.01, following a loss in the previous year. Experts expect earnings of over EUR 1 per share for the year as a whole. The order books are full to bursting at over EUR 5.5 billion, driven by rising defense budgets in Europe and worldwide. The problem lies in the share price. The current price-to-earnings ratio appears extremely high compared to other defense stocks. Many market observers are wondering how much future growth is already priced in.

Bank of America illustrates the ambivalence. It raised its price target to EUR 73 but downgraded the stock to "Underperform." Analysts continue to see solid growth prospects but consider the current valuation too optimistic. However, the business has shown positive signals. A recently secured US defense contract worth USD 99 million for engines underlines RENK's role as a key supplier. The Company is actively positioning itself for the future, for example, through its marine symposium on maritime technology trends. RENK will benefit from geopolitical tensions in the long term, but the valuation will likely remain an issue in the short term. A share currently costs EUR 73.57.

The defense boom is receiving sustained tailwinds from geopolitical tensions. Rheinmetall is benefiting from rising defense budgets with its record order backlog of over EUR 60 billion and is also scoring points with civilian technologies of the future such as high-voltage coolant pumps for electric trucks. Volatus Aerospace uses drones as flying sensors for critical infrastructure inspections and is driving profitable growth through data-driven services. RENK is performing well operationally with full order books, but despite an order volume of EUR 5.5 billion, it has to justify its extreme valuation. All three players remain relevant for strategic investors, but risk management is essential given the sharp rise in Rheinmetall and RENK shares.