British Gas owner Centrica PLC (LSE:CNA) still offers material upside, according to analysts at UBS, despite the Swiss bank's downgraded price target and earnings forecasts as weakness in energy trading nears a potential trough.
With a 'Buy' rating and a new 12-month target of 205p, from 220p, the bank's pitch still sees just over 30% upside to the current market price of around 155p.
UBS, in a note, also cut its earnings-per-share forecasts for 2026, 2027 and 2028 by 3%, 13% and 6%, reflecting weaker trading optimisation and lower expected nuclear output.
Centrica Energy could generate EBITDA of £200 million to £250 million in 2027, below its £300 million to £400 million medium-term target.
Analysts for the Swiss bank blamed reduced Middle East LNG flows into Asia, higher freight and insurance costs, steep backwardation and less capital being allocated to trading risk.
But, the bank noted that “GB domestic supply is now an upside risk”, with smart-meter prepayment settings and renewed warrant-based installations expected to limit further bad-debt growth.
UBS does not assume a release of excess working capital, though it said this “could lead to +c22p/share cash benefit”.
The broker also estimates Centrica has around £1.1 billion of spare investment capacity to 2030 and £1 billion of balance-sheet flexibility.
Centrica trades on 10.9 times UBS’s 2027 earnings estimate, around four turns below the sector. The group operates British Gas, Bord Gáis Energy, Centrica Energy, nuclear generation, Spirit Energy and the Rough gas storage facility.
