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16 Feb 2021 | 15:03

Broker tips: Cerillion, Royal Mail

(Sharecast News) - Analysts at Canaccord Genuity raised their target price on software firm Cerillion from 350.0p to 465.0p on Tuesday, stating that demand was "good" but also noting that execution was "key". Canaccord said Cerillion's order book at the end of September 2020 provided it with visibility for over 90% of 2021 sales forecast, leading it to increase its 2021 sales and margin estimates by 2%.

As a result, Canaccord also made small changes to its 2021-2023 adjusted underlying earnings estimates for the group, translating to larger increases to adjusted earnings per share since it now forecasts Cerillion's tax rate to remain lower than the 18% UK standard rate for longer than it initially expected.

The Canadian bank also highlighted that although the value of Cerillion's recent 5G and Nokia partnerships was "difficult to quantify", it believes the deals should provide a catalyst for orders.

Jefferies upgraded its stance on shares of Royal Mail on Tuesday to 'hold' from 'underperform' and hiked the price target to 450.0p from 300.0p.

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 £580.0m.

"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 were now trading at 12.0x estimates for 2021/22 enterprise value/underlying earnings, in line with the postal sector.
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