Royal Mail Group PLC’s (LON:RMG) share price target has been by raised by 180% by Credit Suisse, which is playing catch-up after the online boom at the parcels and letters group.
The broker now reckons the shares are worth 647p, compared to a previous target of 284p and around 10% higher than the current market price of 589p.
Profits forecasts get a similar upgrade with Credit Suisse's forecast of underlying profits [EBIT] this year rising to £688mln and £729mln in 2023.
The change is down to the improvement in letters in the number of letters being sent said the broker and this remains a major variable for the postal group.
Every 1% change in domestic letter volumes equals £30mln (4%) on its underlying profits forecast.
Credit Suisse now expect letter volumes to be 6% and 11% below the year to March 2020 compared to its previous forecast of a 15% and 19% decline.
That improvement translates into £300mln higher underlying profits and a 250p per share uplift on its valuation.
But the broker is still not convinced longer-term and points to Denmark where mail items per capita are 99 against 294 in 2012.
Its prediction for Royal Mail is 234 items of mail per capita in 2023, which leaves “scope for further decline thereafter,” hence a neutral recommendation.