UBS has kept its 'sell' rating on National Grid PLC (LSE:NG.), arguing the utility’s rich valuation has already priced in much of the good news and leaving its 1,160p price target below the current share price.
The broker said that while investors it has spoken to increasingly view National Grid as a structural growth story rather than a traditional defensive utility, that optimism now looks stretched.
UBS argues the shares are pricing in a roughly 51% premium to spot RAB and rate base, even as the company faces planning bottlenecks, supply-chain risk and mounting affordability pressure tied to the energy transition.
A central part of the bear case is that National Grid’s guided growth looks less attractive when examined through the equity rather than the enterprise lens.
UBS models asset base growth of 9% a year over 2026 to 2031, below company guidance of around 10%, and says equity RAB growth is only about 1.2% annually over 2026-30 as most expansion is debt-funded. That, in the broker’s view, leaves the investment case heavily reliant on persistently elevated valuation multiples.
UBS also questioned whether investors are paying enough attention to execution risk in the group’s capex programme.
It pointed to delays on major East Coast offshore transmission projects, including EGL1, EGL3 and EGL4, and said the current RIIO-T3 assumptions may still prove too optimistic.
Recent infrastructure transaction prices, meanwhile, no longer offer the same upside read-across for listed names, with UBS arguing current multiples already look full.