Proactive Investors - National Grid PLC (LON:NG) has been upgraded by brokers as they continue to see positive upsides from the upcoming election, the improved balance sheet and an “attractive valuation”.
Analysts at Citi upgraded its rating of National Grid to ‘buy’ and lifted the utility firm’s price target from 920p to 985p – representing more than a 9% premium to its current market value.
Citi justified the upgrade by pointing to the “attractive” development of the political and regulatory outlook, while also citing the improved balance sheet helped by its upcoming rights issue.
National Grid is attempting to raise slightly under £7 billion through one of the largest rights issues in recent years.
Analysts believe National Grid’s 7-24 rights issue will help remove much of the uncertainty that has surrounded its finances.
Citi added that the company is “at an attractive valuation for underlying assets” and is currently meeting all its financial and regulatory targets.
Yet, analysts see further scope for the shares to improve, emphasising how they're currently trading at a 10% discount to the company’s long-term regulated asset base.
“With this combination of factors, as well as the potential macro tailwind from rate cuts later in the year and into 2025 from BoE, we see risk-reward tilted to the upside,” Citi said.
Meanwhile, analysts at Jefferies issued a slightly more cautious view but agreed that the new balance sheet headroom will prove beneficial when growing capital expenditure.
Jefferies lowered its earnings per share forecast by 14% for the 2025 financial year following the rights issue dilution.
Nevertheless, it argued the “stock appears cheap” but believes it could have better visibility regarding regulatory updates in the next six to twelve months.