UBS has cut its rating on National Grid PLC (LSE:NG.), the FTSE 100 electricity and gas network operator, from Neutral to Sell, warning that the stock's valuation has reached levels historically associated with sharp price falls.
The Swiss bank raised its 12-month price target to 1,160p from 1,100p but said the shares, currently trading at 1,368p, are priced for a level of asset growth and returns that it believes are unlikely to be delivered.
National Grid now trades at a 57% premium to its regulated asset base (RAB), the value of the physical infrastructure on which the company earns returns, a level the bank said sits at the top of its 30-year historical range.
On four previous occasions when the shares reached similar RAB premia, between 42% and 61%, the stock subsequently fell by an average of 37% over periods of five to 19 months, with an average recovery period of around three years.
UBS analysts said the current valuation implies a cost of equity of 7-8%, well below their own estimate of 8.1%, and RAB growth of 8% per year through to 2041, requiring capital expenditure of around £15 billion annually against their own forecast of £12 billion.
The bank acknowledged that National Grid's recent operating performance has been strong, with group returns on equity running at around 10.6% across its UK and US businesses, and praised the supportive regulatory environment delivered by the Labour government since 2024.
However, it argued that consumer affordability pressures, planning constraints and supply chain challenges present material downside risks to capital expenditure delivery, and that the shares are already fully pricing in the benefits of the RIIO-T3 price control agreed in March 2026.
The shares were flat at 1,371.54p.
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