Analysts at JP Morgan are encouraging investors to “just buy” Royal Mail PLC (LON:RMG) as the investment bank said it is struggling to understand why the share price has “not reacted more positively” to its full-year results.
In a note on Monday, analysts increased their target price for the post and parcel carrier to 801p from 685p and retained an ‘overweight’ rating, commenting that the results had highlighted a “sharply better price/mix and confirmation of material [year on year] cost savings”.
The bank also said the company’s UK business had delivered a margin of 9.8% during the year, although the segment “doesn’t need to generate a margin of anywhere near 9.8% for Royal Mail to be materially undervalued”.
Analysts added that they would not be deterred if UK profits fell in the second half of the 2022 financial year, and also expected a “sharp increase” in the first half to “more than offset this”.
JP Morgan also increased its forecasts for Royal Mail’s operating profit by around 12% for FY22, driven by “stronger parcel revenue”.
Shares in the company jumped 3.2% to 543.4p in late-morning trading.