Mentioned
Tkms AG& Co KGaA
TKMS.DE
-0.80 (-0.80%)
99.80
99.90
Sondre Flateraaker
Switzerland
2m
Weekend Research - $TKMS.DE (Tkms AG& Co KGaA) For this weekend’s research I want to circle back to the core of our Hedge Against War thesis and zoom in on the sea. If you expect a decade of elevated geopolitical risk, it is not enough to own land and air defense; you also need exposure to the navies that will protect sea lanes, undersea cables and even Arctic routes. Any serious stand-off around Taiwan, the South China Sea, the North Atlantic or the High North will involve submarines, surface fleets and, increasingly, ice breaker capacity. That is the context for today’s weekend research on TKMS, our pure-play naval name inside the portfolio. In short, TKMS is to submarines what Rheinmetall is to tanks. It is one of the few Western companies that can design and deliver advanced non-nuclear submarines and surface combatants at scale. The order backlog is about €18.6B as of mid-2025, more than 3x what it was 5 years ago, and stretches well into the 2030s and even the 2040s. Management is targeting roughly 10 % annual revenue growth and EBIT margins above 7 % as TKMS matures from a division inside Thyssenkrupp into a fully independent listed company. Right now TKMS is a small starter position for me, around 0.9 % of the portfolio, and I see it as the naval leg of our Hedge Against War strategy. The backbone of the story is that backlog. It’s not a wish list – it’s contracted work that, at current run-rate, covers something like 8–10 years of revenue. Key blocks are the Type 212CD submarines for Germany and Norway, export boats such as the Type 218 for Singapore and the Turkish program, plus a 10-year, €800M contract to modernize six existing German Type 212A submarines. That last part is important because it is high-margin service and upgrade work, not low-margin first-build work. In a world where the Arctic, the GIUK gap and the approaches to the North Atlantic and Indo-Pacific are more contested, we want these yards busy, skilled and ready – whether that is for more subs, surface ships or, later, ice-capable and ice breaker hulls. From a Hedge Against War perspective, TKMS fits very naturally. If Europe and NATO are serious about securing chokepoints, sea lanes and undersea infrastructure, they must invest in platforms like the 212 family. If the US and allies want credible deterrence around Taiwan, they will need quiet submarines, anti-submarine warfare, mine countermeasures and logistics that may increasingly run through northern routes where ice breaker escorts matter. Europe does not build nuclear submarines, but modern diesel-electric and air-independent propulsion boats are a key part of alliance posture, and the same industrial base is what you lean on when you suddenly realize you need more ice-capable tonnage. On top of this sits a growth and margin story. Management’s goals are simple: grow sales by about 10 % per year and lift EBIT from roughly 4–5 % into the 7 %+ range. The path is series production of common designs, a rising share of service and life-cycle work and better utilization of yards like Wismar as they ramp. Each new hull on a shared platform spreads engineering and overhead; each long-term service contract adds recurring, higher-margin revenue. If later we see a political push for more Arctic presence and ice breakers, that same learning curve and yard utilization will be directly relevant. Financially, TKMS has been set up to stand on its own feet. Ahead of the listing about €10B in guarantees were renegotiated and roughly €2.5B in bank guarantees were put in place, giving TKMS the ability to bid and execute long-duration contracts under its own name. The initial focus is reinvestment in capacity and execution; from around 2027 the plan is to introduce a dividend with a payout ratio of roughly 30–50 % of net profit. So we are not buying a pre-revenue story; we are buying a strategic asset with decades of work in hand and a path toward becoming a cash-paying naval compounder. We also have near-term catalysts. TKMS has been confirmed for inclusion in the MDAX index on 22 December 2025, which forces passive funds and MDAX trackers to buy the stock and usually brings more attention from German and European institutions. In the portfolio I treat it as a small but important piece of the puzzle. At around 0.9 % weight today, I am happy to hold through volatility and to use pullbacks into the low €60s to slowly add, as long as management keeps pointing toward higher margins, the order book stays strong and there is no structural damage to key programs. We am not buying TKMS for a quick trade; We am buying it because I do not think the need for submarines, naval security and ice-breaker-supported Arctic presence goes away anytime soon. To read the full report, check out the link below! It's free as all my Research papers and Market Recap/News. www.patreon.com/posts/weekend-research-145284240?utm_medium=clipboard_copy&utm_source=copyLink&utm_campaign=postshare_creator&utm_content=join_link
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Tkms AG& Co KGaA
TKMS.DE
Tkms AG& Co KGaA
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