TKMS: Record Order Book and a Finished Submarine Chapter, Yet the Share Price Keeps Drifting Lower

The handover of the INS Drakon to the Israeli Navy closed out one of TKMS’s most storied production runs, but the milestone did little to shift the mood in the trading room. Shares settled at EUR 83.30 on Friday, down 0.5 percent on the day, extending a slide that has now reached 7.6 percent over the past seven sessions and 5.7 percent over the last month. The stock remains roughly 23 percent below its August peak of EUR 108.80, a gap that looks all the more striking given the strength of the underlying business.

The disconnect is not hard to quantify. For the first nine months of fiscal 2025/26, revenue climbed 19 percent year on year to EUR 1.890 billion, up from EUR 1.587 billion in the prior-year period. Adjusted EBIT rose 13 percent to EUR 110 million, propelled by the Submarines segment, where the metric nearly tripled. The order backlog stands at EUR 20.1 billion, providing revenue visibility that most industrial companies can only envy.

That performance prompted management to tear up its earlier guidance. Where the company had previously braced for a 1 to 2 percent decline in sales, it now expects growth of 10 to 12 percent, with the adjusted EBIT margin reaching as high as 6.5 percent. For a defence contractor accustomed to decade-long programme cycles, the speed of the revision signals that the order book is being worked through faster than anticipated.

The delivery of the Drakon, the third and final boat in the Dolphin-AIP class, fits neatly into that narrative of execution reliability. Completing a complex, multi-year submarine programme on schedule is precisely the kind of reference point that matters when a shipyard is juggling multiple frigate and submarine contracts simultaneously. Yet the market’s reaction suggests that operational competence alone is no longer enough to move the needle.

Should investors sell immediately? Or is it worth buying TKMS?

Part of the caution can be traced to the F127 frigate programme. Reporting in Der Spiegel at the end of August put the cost estimate for the eight planned vessels at over EUR 40 billion, a sharp jump from the roughly EUR 26 billion figure previously cited. TKMS rejected the number outright, arguing it was not traceable and did not reflect the agreed cost-sharing arrangement with partner Rheinmetall. Even so, the gap between media portrayals and the company’s own account has a habit of unsettling investors, regardless of whether the operational foundation remains intact.

The decision in July to withdraw the non-binding takeover offer for German Naval Yards Kiel adds another layer of nuance. TKMS cited the failure to reach agreement with owner CMN Naval on economic terms, while insisting that its existing yards in Kiel and Wismar are sufficient for current and future workloads. The retreat signals a degree of capital allocation discipline that sits oddly alongside the company’s operational expansion — but it also suggests management is unwilling to overpay for capacity it may not need.

The Fincantieri memorandum of understanding, deepened last Thursday, points in a different direction. Both shipyards were at pains to stress that the arrangement is neither a merger nor an acquisition, and that national programmes will continue unchanged. A binding collaboration framework covering the submarine and underwater domain is expected by year-end. Israeli sources have floated the idea of joint resilience projects with Germany, though that appears to be an announcement on the Israeli side rather than a TKMS statement.

No fresh financial details accompanied either the Dolphin handover or the Fincantieri MoU. The most recent price target circulating in the market, around EUR 111, stems from an older survey and should not be read as a current assessment. That leaves investors with a curious situation: a company that has just raised its outlook, delivered a flagship submarine programme and deepened a European partnership — yet whose share price cannot seem to hold its ground. The market’s focus, for now, remains fixed on the F127 cost question and the Kiel retreat, while the positive news flow is treated as already priced in. Whether the Fincantieri framework agreement, once finalised, can shift that dynamic is the open question for the months ahead.