(CercleFinance.com) – Oddo maintains its ‘underperformance’ rating for Rolls-Royce shares, with a price target lowered from 99 to 90 pence.
The analysis office nevertheless considers that the prospects in civil aeronautics are ‘convincing’, with in particular a ‘low double digit’ turnover growth and a ‘high single digit’ operating margin (vs 10% and 7.4% respectively for the consensus VA 2025).
For Oddo, however, this trajectory targeting medium-term profitability for the Civil Aerospace division is not without risk. “In the short term, the confinements in China are slowing down the recovery of the long-haul and in the medium term, high oil risks modifying the mix by ruling out the most profitable engines”, indicates the broker who adds that the next catalyst will be the arrival of the new CEO.
Finally, the analyst indicates that Rolls has short-term hedges on materials and holds essentially fixed-price or capped contracts with the majority of its suppliers.
‘In our eyes, these contracts are still a risk because, in the current environment, we do not see suppliers being able to compensate for inflation and we anticipate requests for renegotiation’.
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