Rolls-Royce Holdings PLC (LSE:RR.) received an early boost to 2023 as Jefferies put the company on its buy list with an increased price target of 125p, up from 90p.
“As we look to 2023, we are more risk-on, and warm to aftermarket momentum,” the broker said.
It sees a number of positive catalysts for the FTSE-100 listed engineer in 2023, including potential credit upgrades and further flight hours recovery which should build confidence in the group's mid-term potential.
The broker also suggested the group would gain the most from a reopening in China pointing out the resultant improvement in global flights since the reopening announcements bodes well for 2023.
Jefferies also lifted its 2022 estimated EBIT by 16% on better mix and its 2022/23/24 free cash flow forecasts by 22%/9%/2% respectively.
Despite cuts to near-term EPS forecasts reflecting higher non-cash taxes the broker has shifted its focus to mid-term potential.
“We now value new market opportunities within our 2024-SOTP and roll our FCF yield valuation to 2024, boosting our price target to 125p (vs. 90p),” it said.
Shares were nearly 6% higher in early trading.