Analysts at RBC Capital Markets raised their target price on distribution company Bunzl from 2,270.0p to 2,450.0p on Monday following the firm’s “solid” first-half earnings.
RBC said it opted to update its earnings per share estimates in order to better capture recent mergers and acquisitions, foreign exchange movements and “more resilient” underlying second-half revenue assumptions.
As a result, its earnings per share estimates rose by 7.5% for 2021 and 2.5% for 2022, bringing the Canadian bank more aligned with consensus estimates.
However, RBC also retained its ‘sector perform’ rating on Bunzl, reflecting longer-term concerns around structural margin pressures, constraints to M&A-driven growth and limited disclosure, set against an “undemanding valuation” and “relatively resilient” earnings and cash flow profile.
“Bunzl trades on 18x P/E against our revised EPS estimates for both FY21E and FY22E and an EV/EBITA multiple of a little over 14x for both years which is undemanding in the context of the distribution subsector and wider Business Services sector,” said RBC’s analysts.
“We raise our DCF-derived PT to 2,450.0p (from 2,270.0p), reflecting estimate increases, plus the roll-forward of the time adjustment coefficient, and retain a ‘sector perform’ rating on the shares.”
