Babcock International PLC (LSE:BAB) shares were lifted almost 3% to 884.8p, the highest since summer 2017, as a host of banks and brokers warmed to its Cavendish Nuclear business.
JPMorgan analyst David Perry raised his share price target to £11 from £10 as he said the next five years "look very exciting."
He increased his earnings per share forecasts for the next three years by 1%, 2% and 4% following an "upbeat" teach-in on the Cavendish business, which last year represented 7% of group sales.
"We expect BAB to deliver average EPS growth of 10% for the next five years, with high visibility and reducing execution risk. As a result, we now apply a higher target valuation multiple," Perry said, noting that Babcock is "one of the cheapest European defence stocks in our coverage".
Cavendish is targeting revenue of around £600 million by 2030, up from approximately £320 million in the 2025 financial year, according to the briefing.
The division is one of the defence contractor's key non-military units, supporting all 36 UK nuclear licensed sites and involved across the spectrum, including large nuclear new builds and small modular reactors (SMRs).
In addition to Clean Energy, Cavendish also operates in nuclear power decommissioning and has some defence contracts for nuclear submarines, with the latter set to benefit from the AUKUS programme and a strategic partnership with US group HII.
The division has a £1 billion order backlog and a £5 billion pipeline, including active bids worth £1 billion.
The Clean Energy segment, which accounts for 38% of Cavendish Nuclear's revenue, is expected to be the main growth driver, forecast to lift sales from £120 million to £300 million as it supports the UK government’s ambition to raise nuclear capacity from 6GW to 24GW by 2050.
Margins of 12% are above the group average, with the division benefiting from a mild risk profile, with 40% of contracts on a cost-plus basis.
The company sees a £15 billion addressable market in SMRs by 2030 and £25–30 billion in UK nuclear build-out through 2050.
Cavendish Nuclear is one of the top three UK players in its field, alongside Amentum and Atkins.
Peel Hunt analyst Christopher Bamberry's summary was that it is "a quality business with significant upside potential over the medium and long term".
Jefferies analyst Chloe Lemarie said: "Babcock's civil nuclear activity strikes us as the limited-risk, higher-margin activities that investors want to gain more exposure to.
"With self-help driving a recovery to double-digit margin and secular trends driving long-term growth, the Nuclear division should be able to continue to deliver growth despite the peaking out of infrastructure work."