We believe the market is underestimating the challenge of offsetting the forthcoming one-hour reduction in the UK working week. The last such move in October 2018 was the catalyst for the collapse in profits that has only been arrested by the pandemic parcel surge. While the latter has given Royal Mail breathing room, we await details of how management intends to deliver rapid and unprecedented improvements in productivity to offset the next working week cut. We raise our target price to 560p from 480p, but our recommendation remains HOLD.
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