Citi has flagged potential upside of between 80p and 160p a share for Rolls-Royce Holdings PLC (LSE:RR.) from its small modular reactor business, after a fresh contract win in Sweden.
The aerospace and defence group said on Monday it had been selected by Videberg Kraft to build three small modular reactors, compact factory-built nuclear plants, in the country.
Citi called it Rolls-Royce's second international win, following its selection by CEZ in the Czech Republic in 2024.
The broker noted that CEZ had taken a 20% stake in Rolls-Royce SMR, a model it views as unsustainable over the long term.
It is not yet clear whether Videberg Kraft has invested in the unit.
If not, Citi said the deal would mark Rolls-Royce's first open international win on a sustainable footing.
Rolls-Royce's chief executive has said the global market could reach 400 reactors by 2050.
Citi values that total addressable market at about £45 billion on a net present value basis, the worth of future cash flows in today's money.
The estimate assumes £2.5 billion per unit, 10% margins, 3% inflation, 3% terminal growth and a 9% discount rate.
Rolls-Royce owns 57.8% of Rolls-Royce SMR.
On that basis, and assuming the company captures 25% to 50% of the global market, Citi arrives at its 80 pence to 160 pence per share figure.
The Swedish award strengthens the case that Rolls-Royce can win orders without selling equity to its customers, Citi suggested.
