RBC Capital Markets hikes target price on Bunzl

RBC said it opted to update its earnings per share estimates in order to better capture recent mergers and acquisitions, foreign exchange movements and "more resilient" underlying second-half revenue assumptions.

As a result, its earnings per share estimates rose by 7.5% for 2021 and 2.5% for 2022, bringing the Canadian bank more aligned with consensus estimates.

However, RBC also retained its 'sector perform' rating on Bunzl, reflecting longer-term concerns around structural margin pressures, constraints to M&A-driven growth and limited disclosure, set against an "undemanding valuation" and "relatively resilient" earnings and cash flow profile.

"Bunzl trades on 18x P/E against our revised EPS estimates for both FY21E and FY22E and an EV/EBITA multiple of a little over 14x for both years which is undemanding in the context of the distribution subsector and wider Business Services sector," said RBC's analysts.

"We raise our DCF-derived PT to 2,450.0p (from 2,270.0p), reflecting estimate increases, plus the roll-forward of the time adjustment coefficient, and retain a 'sector perform' rating on the shares."