Rolls-Royce nuclear option a winner, says leading investment bank
Last updated: 08:00 11 Apr 2025 EDT, First published: 07:46 11 Apr 2025 EDT
Citi has reiterated its view that Rolls-Royce Holdings PLC's (LSE:RR.) small modular reactor (SMR) programme could add significant value to the business, as the UK government nears a key selection decision expected by June.
It estimates the opportunity could be worth between 11p and 40p per share, depending on the scale of domestic deployment and the potential for export sales.
Rolls-Royce is one of four contenders vying for government backing to build prototype SMRs as part of a wider plan to replace Britain’s ageing nuclear fleet.
According to The Times, Labour leader Keir Starmer is expected to confirm the next stage of the selection process before the summer spending review.
Under Citi's base case, which assumes Rolls-Royce is awarded contracts to help construct 16 reactors between 2030 and 2050, the project could be worth 11p per share.
That figure rises to 40p if demand increases to cover half of UK fossil fuel power generation, and includes additional upside from aftermarket services and overseas orders.
Rolls-Royce currently holds an 80% stake in its SMR consortium.
Citi assumes a 10% profit margin and a 9% discount rate for its valuation. Shares in the FTSE 100 engineer were last trading at around 445p.
The shares are flat at 692.4p.
