In a report released today, Chloe Lemaire from Jefferies maintained a Buy rating on Babcock International, with a price target of p1,330.00.
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Chloe Lemaire’s rating is based on the promising growth prospects for Babcock International’s Marine division. The recent Marine Investor Day highlighted potential upside risks to the medium single-digit growth guidance and a pathway to achieving margins above 9%. The international market is expected to contribute significantly to this growth, driven by the customizable and cost-effective Arrowhead design, and lessons learned from the Type 31 program are anticipated to enhance future performance.
Furthermore, the Marine division, which constitutes a substantial portion of Babcock’s revenues, is positioned for meaningful top-line and margin improvements. With a focus on the Design & Build and Support segments, Babcock aims to achieve medium single-digit sales growth and improve margins by converting key build opportunities. Management’s confidence in securing these projects within the next 12-18 months, along with expected efficiency gains and high-margin license sales, supports the positive outlook and justifies the Buy rating.