Berenberg hikes target price on Kainos

Kainos released its full-year results on Monday, which Berenberg said demonstrated its "bottom-line resilience", despite revenue coming in slightly below consensus.

Berenberg stated that although cyclical challenges in Kainos' services divisions will constrain growth in FY25, its Workday Products offering was performing "strongly" and that the medium- to long-term outlook for the business remains "overtly strong".

"While Kainos does not provide explicit guidance, CEO Russell Sloan noted that Kainos is positioned for 'substantial growth opportunities in both the near and medium term'. We think that challenges remain, with revenues from the Digital Services division's commercial sector expected to see 'modest reductions' in FY25. However, revenue from the healthcare

sector, which declined 11% in FY24, is expected to return to growth. Meanwhile, revenues from the public sector and both Workday divisions (c80% of group revenues in total) are expected to see further growth in FY25," said Berenberg.

"Despite cyclical challenges in its services divisions and the short-term disruption of an impending UK general election, Kainos's long-term prospects remain undiminished and overtly positive, in our view."

The German bank added that Kainos trades on 23.9x full-year earnings per share and 23.3x enterprise value/free cash flow.

Reporting by Iain Gilbert at Sharecast.com