A leading investment bank has described Thursday’s Royal Mail PLC (LSE:RMG) (RMG) trading statement as “re-assuring”.
Deutsche Bank (NYSE:DB) reckons RMG is on course to at least match consensus for the full year, which stands at GBP860mln. It is expecting the postal and parcels group to make GBP897mln.
It said while UK mail volumes are moderating quickly, it reckons parcel growth is ‘holding up well’.
At the same time, Deutsche expects RMG to eke out “significant cost savings” from the business in the second half and believes there is a wage deal to be struck with the Communication Workers Union.
Turning to the valuation of the shares, it points out the stock is currently changing hands for just over 7.4-times earnings, yet the business’ free cash flow is 12.1%.
Deutsche reiterated its ‘buy’ recommendation and 763p a share price target – that’s around 60% ahead of the current valuation of 476p.
