RBC upgrades Bunzl after de-rating, ‘robust’ FY results

RBC Capital Markets lifted its stance on Bunzl shares on Monday to ‘sector perform’ from ‘underperform’ and upped the price target to 2,270p from 2,200p following a de-rating.
The bank pointed to a “robust” set of FY results earlier this month and the stock’s 20% underperformance versus the FTSE All Share index over the past six months.

“Though the recovery trajectory for non-Covid 19-related products is uncertain, transportation cost pressures are building and FX has moved the wrong way, bolt-on M&A will continue to support earnings per share, revenues remain well diversified and we believe the valuation no longer looks stretched,” RBC said.

It said the extent to which Covid product demand unwinds and other products recover as lockdowns gradually ease is uncertain, “but there is something of a natural hedge in place in terms of the revenue profile”.

On the cost side, RBC said that despite a good track record of managing product cost inflation and supply bottlenecks, rising logistics costs could add headwinds to the underlying FY21 margin progression, though this is likely to be mitigated via higher margin bolt-on M&A.

At 1050 GMT, the shares were up 2% at 2,344p.