Jefferies upgrades Royal Mail to ‘hold’

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.