Babcock International PLC (LSE:BAB), the engineering group best known for maintaining the Royal Navy’s submarines, looks set for a longer runway of growth following last week’s NATO summit.
Citi has upgraded its forecasts for the group, pointing to the UK Government’s new defence spending target of 3.5% of gross domestic product by 2035.
“The new commitment to grow from ~2.5% in 2029 to 3.5% in 2035 means that we lift our medium-term growth (years 6–10) from 3% to 9%,” the analysts wrote.
That change alone more than justifies a higher valuation, but operational improvements are playing a role too.
Citi now expects Babcock to hit 8% a year early, in March 2026, and to reach 9% by 2030.
Its new target price is 1,338p, up from 730p, with a reiterated ‘buy’ rating.
That suggests further upside, even after a strong run.
The shares were 4p higher at 1,141p.