Citigroup Inc (NYSE:C) analysts have reiterated their buy recommendation for shares in Royal Mail, which officially changed its trading name and ticker to International Distributions Services PLC (LSE:IDS) last month.
Citigroup analysts have lowered their target price, where they believe the company’s share price would create ‘fair value’ for shareholders, to £3.25 per share.
The current listed share price for International Distributions Services PLC (LSE:IDS) is 261.8p per share, as of Thursday mid-afternoon.
Analysts said they believe that pay increases will be offset by improvements in productivity, operations and network optimisation.
They analysed cost savings from seasonable contracts, reduced sorting hours and sickness rates.
Citigroup analysts estimate that the potential disposal value of the company’s real estate is worth about £240 million, given the network optimisation at Parcelforce and Royal Mail depots.
“We believe that c.10% of pay rises between 2022 and 2025 amounting to £400m will be more than offset by the proposed productivity, operational improvements, and network optimization,” Citigroup analysts said in a research note on Thursday.