Deutsche Bank lifts Rolls-Royce target to 1705p on margin strength Proactive uses images sourced from Shutterstock
Deutsche Bank has raised its price target on Rolls-Royce Holdings PLC (LSE:RR.) to 1705p from 1325p, arguing that the engine maker’s momentum extends well beyond the end of its current guidance period.
The bank reiterated its ‘buy’ rating, with the new target implying upside of around 11% from the 1529.4p close.
Analyst Christophe Menard has revised his 2028 expectations following the upgrade to full-year guidance, noting that every division is already running ahead of forecasts this year.
The standout figure is the civil aerospace operating margin, which hit a record 25.3% in the first half.
That is comfortably above the 21% to 23% range Rolls-Royce has guided to for 2028, two years early, and Menard sees no meaningful headwinds ahead.
Behind it sits a stronger aftermarket performance, driven by improved margins on long-term service agreements and a higher volume of shop visits.
Long-term service agreements are the contracts under which Rolls-Royce maintains engines over their operating life, historically a drag on profitability because the group was paid by the flying hour while carrying the maintenance cost.
Deutsche treats the improvement there as structural rather than cyclical, forecasting a 28 percentage point swing in long-term service agreement margins between 2022 and 2028.
That comes from a combination of operational and commercial measures, with engines staying on wing for longer and the cost of each shop visit falling.
The upgrade continues a run of increases from the bank, which had been at 1325p before this note.