Earlier today the Suncorp Group Ltd (ASX: SUN) share price briefly touched on a 52-week high of $11.18 before market weakness dragged it lower.
When the insurance and banking giant's shares hit that level, it meant they were up a sizeable 12% since the start of the year.
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Can the Suncorp share price keep on climbing?
Despite the strong form of the Suncorp share price in 2021, one leading broker believes it still has plenty of gas in the tank.
According to a note out of Goldman Sachs this morning, its analysts have retained their buy rating and $12.05 price target on the company's shares.
Based on the current Suncorp share price of $10.98, this price target implies potential upside of approximately 10% over the next 12 months.
And if you include the 5.4% fully franked dividend yield the broker is forecasting over the next 12 months, this potential return stretches beyond 15%.
What did Goldman say?
Goldman Sachs has responded to the release of Suncorp's general insurance investor day update this morning.
It commented: "A very brief 3Q21 update suggests improved rate/volume trends in Australian personal lines have carried from 1H21 into 3Q21, reinvigorated broker originations have supported a return to growth in the bank from February, digital interactions have continued to increase (1H21 home/motor digital sales +10%) and SUN has strong reinsurance cover for the remainder of the year (we estimate SUN is on the cusp of its FY21 aggregate cover)."
The broker notes that Suncorp's insurance business and efficiency targets remain the same, which bodes well for the future.
Goldman explained: "SUN's three year targets for the insurance business remain unchanged, calibrated to a GI underlying margin of 10-12% by FY23 (GSe 10.0%), while efficiency targets also remain unchanged, where SUN is targeting a group cost base of A$2.8bn over FY21/FY22, before reverting to A$2.7bn in FY23. SUN has however provided more colour around the drivers of margin expansion plus source of cost savings to FY23."
Overall, the broker was pleased with the update and believes its investment thesis remains intact.
It concluded: "On balance, our first take of material released this morning suggests no immediate risks to our FY21 estimates. In FY23 we forecast an underlying margin of 10.0%, where we appear to be slightly ahead of VA consensus at 9.7%. A shift to the mid-point of SUN's margin target would represent around 6% upside to our cash EPS, and on balance with claims management optimisation the most meaningful driver of SUN's expected margin trajectory, we expect any outer year upside to consensus margin expectations today will be dependent on how convincing, clear and tangible SUN frames opportunities in this morning's presentation. Maintain Buy."
