Citi starts TKMS with 'neutral' rating on 'lumpy' project-based cashflow

TKMS AG & Co KgaA

15/01/2026 09:44

** Citi initiates German maritime defence company TKMS TKMS.DE at "neutral," saying its reliance on large projects reduces forecasting visibility, despite high growth expectations amid rising naval defence spending

** Citi forecasts strong profit growth driven by rising defence spending, with capacity set to double at its Wismar shipyard

** It notes, however, that because submarines and ships are large projects businesses, they "tend to be lumpy in profile (especially cash) and wins/losses in contracts have larger impacts on the company"

** The broker says its "high risk" designation of TKMS is due to its low margins "increasing the risk of higher profit volatility depending on contract execution" and a limited post-spinoff trading history

** A potential catalyst is the cancellation of the rival F126 frigate program, which could add 3-4 euros per share to fair value if TKMS's alternative is selected, Citi says

** TKMS' share price is up roughly 16% since it began trading in October

 (Reporting by Maria Rugamer)

 ((Maria.Rugamer@thomsonreuters.com))