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Centrica shares offer 30% more upside, JP Morgan reckons

The investment bank believe the share price outperformance is set to continue as the market appreciates the turnaround story

Centrica PLC - British Gas owner Centrica gets target price nudge by JP Morgan reflecting lower net debt

Centrica PLC (LON:CNA) shares are worth a third more than their current level, JPMorgan Cazenove said, as the British Gas owner has made good progress cutting debt.

The market should keep appreciating the turnaround story and the earnings growth potential after last week’s trading statement showed resilience in a challenging environment, analysts at the investment bank said.

READ: Centrica finance chief leaves after just seven months

They believe Centrica can realise financial benefits with cost efficiencies in UK Home, the sale of Spirit and lower losses in Hive and DE&P.

The stock remains an ‘overweight’, with a target price of 66p from 60p previously, and upcoming catalysts such as the resumption of the dividend, an agreement with pension trustees and the announcement of medium-term targets.

“We are encouraged that the majority of players in the retail market appear to be passing through higher commodity costs to their customers in their competitive offerings, with the gap between the cheapest and most expensive tariffs remaining broadly consistent over the past few months,” analysts commented.

“The energy white paper published in December proposed the removal of supplier thresholds of ECO and the Warm Home Discount, which should level the playing field in the market.”

“Proposals to introduce more switching in the energy supply may be negative in the long run (2024+) but should promote even further discipline for the players in the market today.”

Shares rose 2% to 50.45p on Tuesday late morning.

Quick facts: Centrica PLC

Price: 51.94 GBX

LSE:CNA
Market: LSE
Market Cap: £3.05 billion
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