Analysis of KNDS' €20 Billion IPO Valuation and Investment Opportunities in the European Defense Industry

Based on an in-depth analysis of KNDS and the European defense industry, I will provide a comprehensive analysis from three dimensions: valuation rationality, market logic, and investment opportunities.

• Rheinmetall
  : Market capitalization $69.99 billion, P/E ratio 84.52x [0]
• Thales
  : Market capitalization $47.24 billion, P/E ratio 69.41x [0]
• BAE Systems
  : Market capitalization $49.35 billion, P/E ratio 25.89x [0]

Based on the peer average P/E ratio of approximately 60x, KNDS needs an annual profit of about $3.3 billion to support its €20 billion valuation. According to industry analysis, KNDS currently has an order backlog of up to €23.5 billion, indicating a strong business foundation [1].

• Leading Position: Manufacturer of Leopard 2 tanks with extremely high technical barriers
• Abundant Orders: €23.5 billion order backlog provides revenue certainty
• Geopolitical Benefits: Surge in European defense spending

⚠️

• Relatively High Valuation: Slightly expensive compared to BAE Systems’ 26x P/E ratio
• Policy Dependence: Highly dependent on government defense budgets
• Geopolitical Risks: Peace processes may affect long-term demand

• The ongoing Ukraine conflict continues to heighten European security concerns
• The U.S. strategic focus shift has made European autonomous defense needs urgent
• NATO members have raised defense spending to more than 2% of GDP [2]

• The EU promotes “strategic autonomy” and focuses on supporting the defense industry
• Governments of various countries simplify defense procurement processes to accelerate order implementation
• Cross-border integration accelerates to build European defense giants to cope with international competition

Defense stocks performed outstandingly in 2025:

• Rheinmetall
  : YTD +154.64% [0]
• Thales
  : YTD +67.15% [0]
• BAE Systems
  : YTD +46.60% [0]

The market’s revaluation of the defense sector reflects the revision of long-term growth expectations.

• KNDS dual listing (Paris + Frankfurt) may have pricing differences
• Institutional investor allocation demand may push up the first-day gain
• The market gives a premium to the scarce European ground system leader

• Tank replacement orders from multiple European countries will be implemented in 2025-2026
• Signing of defense contracts related to Ukraine’s reconstruction
• Valuation revaluation brought by R&D breakthroughs in next-generation weapon systems

• Further integration of the European defense industry; KNDS is expected to expand market share through acquisitions
• Increase in cross-border cooperation projects, such as the next-generation main battle tank co-developed by France and Germany
• Export market expansion, especially demand growth in the Middle East and Asia-Pacific regions

• Unmanned and intelligent equipment upgrade cycle has started
• Application of artificial intelligence in the military field brings new markets
• Green defense (electrification, low emission) technological innovations

• Geopolitical detente may reduce the urgency of defense spending
• Government changes lead to defense policy adjustments
• Risk of defense budget cuts under fiscal pressure

• Valuations have fully reflected short-term positives, with correction pressure
• The industry has obvious cyclical characteristics, relying on the rhythm of large orders
• Exchange rate fluctuations affect the profit performance of multinational enterprises

• Active Investors
  : Can pay attention to KNDS IPO opportunities; it is recommended to allocate no more than 5-8% of the portfolio
• Conservative Investors
  : Prioritize BAE Systems, which has a relatively reasonable valuation among listed companies
• Long-Term Investors
  : Consider diversifying risks through defense-themed ETFs and sharing the dividends of industry growth

• Short-Term
  : Pay attention to the detailed financial data disclosed in KNDS’ prospectus
• Medium-Term
  : Track the progress of defense budget approvals in European countries in 2025
• Long-Term
  : Monitor geopolitical evolution and the process of European defense integration

The European defense industry is experiencing a historic opportunity period, and KNDS’ IPO represents an important milestone in this trend. Although the €20 billion valuation is at a relatively high level, considering the company’s scarcity, industry position, and growth prospects, it still has investment value. Investors should closely monitor geopolitical changes and industry integration dynamics to seize the investment opportunities in this round of the golden development period of European defense.

[0] Gilin API Data
[1] Merkur - “Rüstungsriese KNDS erzielt Spitzenresultate – mit Aufträgen im Wert von über 23 Milliarden Euro” (https://www.merkur.de/wirtschaft/ruestungsriese-knds-erzielt-spitzenresultate-mit-auftraegen-im-wert-von-ueber-23-milliarden-euro-zr-93653615.html)
[2] Bloomberg - “Trump’s Retreat as World’s Top Cop Opens the Door to Regional Strife” (https://www.bloomberg.com/news/articles/2025-11-18/trump-s-retreat-as-world-s-top-cop-opens-the-door-to-regional-strife)