Broker tips: BT Group, Hochschild Mining, ITV, Cerillion

Citi upped its price target for BT Group on Monday, arguing that the telecoms company had entered into a period of "solid" earnings growth.

The bank, which reiterated its 'neutral' rating, now has a target price of 185.0p on the blue-chip, up from 175.0p.

It said: "We think BT has entered a phase of solid earnings before interest, tax, depreciation and amortisation growth, supported by CPI-indexed price increases, easing legacy headwinds and Covid recovery, and therefore expect full-year 2023 EBITDA to be close to its £9.7bn target."

Citi acknowledged that potential long-tail risks to the investment case included "losing high margin wholesale customers to alternative networks", including Virgin Media O2, and potential volatility surrounding Altice-founder Patrick Drahi's 12.1% stake.

But the bank concluded: "We maintain our 'neutral' rating with price target increase to 185.0p after factoring the lower fibre to the premises rollout costs and higher tax credits."

Analysts at Bank of America downgraded their recommendation for shares of Hochschild Mining from 'buy' to 'underperform', marking down their target price from 280.0p to 90.0p in the process.

The latter, they said, valued the company at 0.5 times its net present value, which was at the trough end of its historical price-to-net present value valuation range.

They specifically cited the Peruvian government's announcement that it would close four mines for the move, leaving Hochschild with a sole remaining mine, San Jose, in Argentina.

Two of those, Inmaculada and Pallancata, represented roughly three quarters of their net present value-to-discounted cash flow valuation for the company and approximately 70% of its earnings before interest, taxes, depreciation and amortisation. Inmaculada alone was responsible for 60% of the miner's EBITDA.

"While the company will likely dispute this decision we don't see equity outperforming until the dispute is resolved."

Analysts at Berenberg raised their target price on broadcaster ITV from 109.0p to 128.0p on Monday after advertising revenues surprised positively in the third quarter of the firm's trading year.

Berenberg stated advertising was "much stronger than expected" despite the fact that it was already expected "a solid Q3" for ITV, given easy comparables and a desire by marketers to tap into elevated levels of consumer disposable income/savings.

The German bank highlighted that it while it had not originally anticipated any year-on-year growth in the fourth quarter, given that this was up 3% in 2020, the strong trend appears to have continued, with company guidance now suggesting that the year should finish with advertising up by 24%.

"With costs relatively fixed at this point in the year – it is too late to increase programming budgets – this incremental revenue will drop to the bottom line, and prompts a 16% increase in our EPS estimate for 2021. This has indeed been a very strong year for ITV," said the analysts.

However, while Berenberg pointed out that advertising had surprised positively, it added that it cannot help thinking that this was inconsistent with the decline in consumption of ITV content, leading it to reiterate its 'hold' rating on the stock.

Analysts at Canaccord Genuity materially raised their target price on software firm Cerillion from 665.0p to 950.0p on Monday following the firm's "very impressive" full-year 2021 performance.

Canaccord Genuity highlighted that Cerillion had seen sales organically increase 25% in the year, while adjusted underlying earnings had smashed through market forecasts with year-on-year growth of 81%.

The Canadian bank also pointed out that Cerillion's October trading statement indicated "a very strong set of FY21 results" and while it acknowledged that the company's shares had risen "substantially" as a result, it doesn't think they had "re-rated materially".

"We upgrade on the back of an increasing order bank, tempered somewhat with the expectation that gross margin should decline somewhat from the FY21 level, as the percentage of high margin software licences in the mix decreases to more normal levels," said Canaccord.

The analysts, who maintained their price-to-earnings premium versus the UK sector at 15-20% given that top-line growth and adjusted EBIT margins were now both materially above the sector average, also reiterated their 'buy' rating on the stock.