DCF Studio

    RHM.DE · GER · Industrials

    Rheinmetall AG

    Also onConsensus Drift

    Implied value per share

    EUR 1149.69

    Market price

    EUR 1011.80

    Implied upside

    +13.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 7.3% of revenue against depreciation of 4.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: EUR assumption - no free live source available for this market.

    Current EV/EBITDA of 21.2x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    EUR 1149.69+13.6%
    Exit multiple
    EUR 1472.44+45.5%
    Market price
    EUR 1011.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 11.5bnEUR 13.3bnEUR 15.4bnEUR 17.8bnEUR 20.6bn+15.7%
    EBITEUR 1.7bnEUR 1.9bnEUR 2.2bnEUR 2.6bnEUR 3.0bn+15.7%
    NOPATEUR 1.2bnEUR 1.4bnEUR 1.7bnEUR 1.9bnEUR 2.2bn+15.7%
    Add depreciation & amortisationEUR 530.2mEUR 613.6mEUR 710.1mEUR 821.8mEUR 951.0m+15.7%
    Less capital expenditureEUR -840.9mEUR -973.2mEUR -1.1bnEUR -1.3bnEUR -1.5bn+15.7%
    Less increase in working capitalEUR 501.8mEUR 580.8mEUR 672.1mEUR 777.8mEUR 900.1m-15.7%
    Free cashflow to firmEUR 1.4bnEUR 1.7bnEUR 1.9bnEUR 2.2bnEUR 2.6bn+15.7%
    Discount factor0.97010.91280.85900.80830.7606-
    Present valueEUR 1.4bnEUR 1.5bnEUR 1.7bnEUR 1.8bnEUR 2.0bn+8.9%
    Present Value Of The ForecastEUR 8.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate2.60%EUR assumption - no free live source available for this market (assumption)
    Equity risk premium6.00%Market assumption
    Beta0.619Reported 0.431, pulled toward 1.0 (Blume)
    Cost of equity6.31%Risk-free + beta x equity risk premium
    Cost of debt6.26%Interest expense / average total debt
    Market capitalisationEUR 47.2bn97.4% of capital
    Total debtEUR 1.3bn2.6% of capital, book value as a proxy
    Tax rate25.3%Effective, capped at statutory
    WACC6.27%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareEUR 1149.69

    84% of EV

    Forecast FCFF, final year
    EUR 2.6bn
    Capex at depreciation, working capital in reinvestment
    EUR 2.6bn
    Less reinvestment at g/ROIC (15.7% of NOPAT)
    EUR -404.1m
    Capitalised
    EUR 2.2bn
    ROIC (reported)
    15.9%
    Terminal value, undiscounted
    EUR 59.0bn
    Terminal value, discounted
    EUR 44.9bn
    Enterprise value
    EUR 53.2bn
    Less net debt
    EUR -409.0m
    Equity value
    EUR 53.6bn

    Exit at 20.0x EBITDA

    Value per shareEUR 1472.44

    88% of EV

    Terminal value, undiscounted
    EUR 78.8bn
    Terminal value, discounted
    EUR 60.0bn
    Enterprise value
    EUR 68.3bn
    Less net debt
    EUR -409.0m
    Equity value
    EUR 68.7bn

    Spread between methods: 25%.

    Sensitivity

    Value per share (EUR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.27%1714.851994.032430.193208.834997.76
    5.27%1260.351386.971558.811805.782191.55
    6.27%996.521064.291149.701260.821411.60
    7.27%824.22864.10912.08971.001045.22
    8.27%702.88727.78756.79791.07832.29

    Outlined: this model. Green text: above today's price of 1011.80. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year15.7%12.8%-2.9pp
    EBIT margin14.5%12.5%-2.0pp
    Discount rate6.3%6.8%+0.5pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.