UBS has lifted its price target on Centrica PLC (LSE:CNA) to 230p from 200p, arguing the British Gas owner still looks undervalued despite a stronger share price and a more volatile energy backdrop.
The broker, which has repeated a 'buy' recommendation, said a jump in UK gas-price assumptions following the recent conflict should bolster Centrica’s trading arm and nuclear generation exposure, even though it trimmed its 2026 earnings forecast slightly.
UBS now models UK gas at 186p per therm, up sharply from 79p previously, and 100p per therm in 2027 versus 70p before. While 2026 adjusted EPS is cut to 13.04p from 14.01p, UBS raised its 2027 forecast to 17.95p from 15.70p.
“Centrica Energy is the swing for group profits,” the analysts wrote, forecasting roughly £310 million of EBITDA from the division in 2026 and £370 million in 2027, ahead of the company’s £250 million outlook for next year. UBS also pointed to additional optionality in Rough gas storage, which it noted generated about £500 million during a gas-market dip in late 2022.
Beyond trading, the broker sees more value in Centrica’s infrastructure and regulated-style assets than the market is giving credit for. It raised its target partly to reflect a better outlook for British Gas Services, longer assumed life for AGR reactors and improved expectations for smart-meter installations.
UBS also flagged the long-term worth of Centrica’s 20% stake in Sizewell B, alongside possible upside in UK domestic supply from lower discounting, weaker switching and eventual reform of the retail price cap.
On UBS numbers, stripping out around £1 billion of excess cash leaves Centrica trading at about 10.2 times 2027 earnings and 5.2 times EV/EBITDA, below the 6 times multiple the bank believes is more appropriate.