HRL Holdings delivered a stronger-than-expected first quarter trading update, according to Morgans. This was considered to be the result of revenue recovering from a challenging fourth quarter to be in-line with the previous corresponding period. Additionally, earnings (EBITDA) were higher, assisted by JobKeeper, explains the broker.
First half earnings guidance was better than Morgans expected and reflected strong food testing volumes from Analytica, flat environmental volumes and initial signs of a recovery in Geotech.
The broker increases the FY21 earnings forecast by 13% and notes the group's typical 1H/2H seasonality would imply upside risk to the broker's estimates.
With a strong medium-term growth outlook and further upside from accretive M&A, the Add rating is maintained.
The target price is raised to $0.16 from $0.15.
Sector: Commercial & Professional Services.
Target price is $0.16.Current Price is $0.12. Difference: $0.04 - (brackets indicate current price is over target). If HRL meets the Morgans target it will return approximately 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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