Rolls‑Royce: Bank Sees More Fuel in the Tank

RBC Capital Markets has initiated coverage on Rolls‑Royce Holdings PLC (LSE: RR) with an Outperform rating and a price target of 1,275 pence, signalling confidence in the aerospace & defence giant’s recovery and growth trajectory. RBC points to several key strengths: under new CEO Tufan Erginbilgic, Rolls‑Royce has stabilised operations, five‑folded cash generation between 2022 and 2024, and repeatedly beaten and raised its own expectations. A major part of the bank’s thesis centres on Rolls’ dominance in wide‑body aircraft engines. These engines (including the Trent XWB, Trent 1000 and Trent 7000) represent a duopoly with General Electric Company and are valued by RBC at about £68 billion in net present value — roughly 70% of Rolls’ current market cap. Beyond aviation, RBC highlights the company’s growth potential in its Power Systems division (engines and generators for datacentres, defence, marine) which it expects will grow at ~10% annually. Moreover, Rolls’ next‑generation engine (the Ultrafan) and its small modular reactor ambitions offer “optional upside” above the core business. While RBC acknowledges that some upside is already priced in, it maintains that Rolls is now in a cash‑harvesting phase: heavy investment cycles are largely behind it, and the company is focused on extracting value from established platforms and expanding adjacent businesses. #RollsRoyce #AerospaceRecovery #WidebodyEngines #CashGeneration #SlimScan #GrowthStocks #CANSLIM