Canaccord Genuity raises target price on Cerillion

Canaccord Genutiy said Cerillion's recent interim results showed an "encouraging" growth in organic sales of about 25% and temporarily elevated underlying earnings margins of 39%, with some normalisation likely in the second half of the year due to salary inflation.

The Canadian bank stated backlog was slightly down year-on-year and sequentially due to the timing of larger deal signings, which the company expects to accelerate in the second half. It also noted that new customer momentum was "strong", with the new logo sales pipeline up 31% year-on-year at £172.0m.

"We have raised our revenue, EBIT & EPS forecasts with our/consensus estimates implying a 67:33 1H:2H EBIT split - this seems conservative compared to the 45:55 historical average and in our view implies scope for upside," said Canaccord.

"The shares' current ~29x cal. '23 P/E is broadly inline with UK peers such as Aptitude, Netcall and Alfa FS despite superior top line and EPS growth. Our new target is based on a cal. 2023 P/E of 34x, a 25% premium to listed peers due to its superior growth and higher margins."

Reporting by Iain Gilbert at Sharecast.com