Jefferies upgraded its stance on shares of Royal Mail on Tuesday to ‘hold’ from ‘underperform’ and hiked the price target to 450p from 300p.
The bank said a better-than-expected peak season and ongoing Covid-19 restrictions lead to a 60% increase in its FY20/21E operating profit forecast to £580m.
“We estimate the exceptional Covid-19 impact at circa 25% of operating profit and project FY21/22E at £432m, assuming a 12% parcel volume decline, mitigated by an 8% letter volume recovery, and 4% lower opex,” it said.
Jefferies noted the shares are now trading at 12.0x FY21/22E EV/EBIT, in line with the postal sector.
At 1335 GMT, the shares were up 1.9% at 476.54p.
