Rolls-Royce Holdings PLC (LSE: RR.) has had its target price raised to 1,647p from 1,101p by Citi, following a material upgrade to the broker’s long-term profit and cash flow forecasts.
The revision comes after Rolls-Royce delivered strong first-half results that prompted Citi to significantly reassess its outlook across all of the company’s major divisions.
Citi increased its longer-term estimates by between 30% and 40%, reflecting improved expectations for each segment of the business.
Power Systems emerged as the single biggest contributor to those upward revisions, providing the largest source of additional value in the broker’s updated model.
Despite raising the target price by nearly 50%, Citi held its rating at ‘neutral’, declining to upgrade the stock to ‘buy’ at current levels.
The broker cited the substantial share price appreciation already seen in Rolls-Royce as the key reason for maintaining its cautious stance, saying insufficient upside remained to justify a more positive rating.
Citi also upgraded its forecasts for Civil Aerospace, though it applied more restraint to its Defence estimates, arguing that the record margins delivered in the first half were unlikely to be sustained over the longer term.
The broker’s sensitivity analysis now identifies Power Systems as the most influential driver of Rolls-Royce’s overall valuation, a notable shift that sees it overtake Civil Aerospace in importance.
That repositioning reflects stronger long-term earnings and cash generation assumptions for the division, which Citi now views as central to its investment case for the company.
The revised 1,647p target represents a significant upgrade in absolute terms, but Citi was clear that the rerating already embedded in the share price limits how much further the stock can run from here.
