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UK water companies remain pick of utilities for Deutsche Bank through coronavirus crisis

Analysts at the bank also downgraded their recommendation on National Grid

National Grid -
A reservoir of value?

UK water companies are the pick of the utility stock through the coronavirus pandemic for analysts at Deutsche Bank, though they downgraded National Grid PLC (LON:NG.).

Three weeks after taking an initial reaction to the crisis, the analysts on Friday issued a “more developed assessment” of the potential impact of the virus on sector earnings. 

Continental stocks with “cyclicality… power price exposure and… more-risky regulated networks” were kept on ‘sell’ recommendations. 

“We maintain a bias towards regulated and high-quality integrated utilities,” they said. 

‘Buy’ ratings were maintained on United Utilities Group PLC (LON:UU.), Pennon Group PLC (LON:PNN), Severn Trent PLC (LON:SVT) and some continental players. 

However, National Grid was one of those downgraded to ‘hold’ following a recent increase in the share price, offering little upside to the unchanged 910p target price.

SSE PLC (LON:SSE) was not changed from DB’s ‘hold’ rating, though its target price was cut to 1,100p from 1,350p.

Elsewhere, analysts at Berenberg also put out a note on SSE, saying its “focus on regulated networks and renewables presents a compelling mix during the COVID-19 uncertainty” and “ticks a lot of boxes on the ESG front especially now that it has exited coal". 

But the analysts felt the valuation offers “little upside” and it remained at ‘hold’, cutting the price target to 1,300p.  

Quick facts: National Grid

Price: 902 GBX

Market: LSE
Market Cap: £31.66 billion

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