GCIRBC Capital lifts Capita price target to adjust for recent disposal
RBC l Markets lifted its price target on Capita on Thursday to 2,200p from 1,800p as it adjusted forecasts for the Capita One disposal.
Capita announced last week that it was selling its public sector software business for £200m to Orchard Information Systems, a subsidiary of MRI Software.
Capita One provides local authorities, local education authorities and housing associations with revenues and benefits, social housing management and education management software.
RBC said that while the disposal is dilutive for 2025 estimates by around 16%, a good price was achieved and it significantly improves the balance sheet position.
"We rework our sum of the parts, which increases our target price to 22p to reflect the disposal proceeds, along with a recent re-rating of peers, e.g. TEP and SRP," it said.
"Whilst our upside scenario points to significant upside, there remain many moving parts - Capita has yet to demonstrate sustainable free cash flow generation, whilst growth is hard to come by and AI concerns are likely to hang over the CX business."
The bank maintained its 'sector perform' rating on Capita.
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.