Rolls-Royce: Oddo cuts target price
(CercleFinance.com) - Oddo maintains its "underperform" rating on Rolls-Royce shares, having reduced its target price for them from 99 pence to 90 pence.
Despite this revision, the broker believes that the outlook for the civil aeronautics business is compelling, with low double digit revenue growth and high single digit operating margin (vs. 10% and 7.4% respectively for the VA 2025 consensus).
However, for Oddo, this trajectory targeting medium-term profitability for the Civil Aerospace division is not without risks. In the near term, the lockdowns in China are slowing down the recovery of the long-haul business and in the medium term, high oil prices may change the mix by pushing aside the most profitable engines, the broker says, which adds that the next catalyst will be the arrival of the group's new CEO.
Finally, the analyst says that Rolls has short-term hedges on materials and essentially has fixed-price or capped contracts with most of its suppliers.
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