Broker tips: Centrica, Babcock, Ashtead
By Iain Gilbert
Date: Monday 30 Jun 2025
(Sharecast News) - JPMorgan Cazenove downgraded British Gas owner Centrica on Monday to 'neutral' from 'overweight' and trimmed its price target on the stock to 167.0p from 170.0p, citing limited valuation upside.
"Our analysis suggests that Centrica shares present a balanced risk/reward proposition and we therefore downgrade the stock to neutral," the bank said.
JPM noted that the shares have outperformed the sector by around 290% since 3Q 2020, where it argued that the market underappreciated the group's balance sheet strength as well as potential earnings upside from restructuring.
"With much of this now realised, and with the normalisation of commodity prices and volatility, we see more limited upside from here," it said.
The bank said its refreshed 2025/2026 earnings per share estimates were 11%/5% below Bloomberg median consensus.
"We expect interim results on July 24th to confirm that Energy Markets & Trading as well as UK Energy Retail market conditions remain challenging, although investors should see these conditions as one-off," JPM said.
Citi hiked its price target on Babcock to 1,338.0p from 730.0p and reiterated its 'buy' rating as it said growth was likely to accelerate over the next ten years.
Citi said it was updating its forecasts, with three main changes - reaching 8% margins a year early in FY26, hitting 9% margins by FY30, and accelerating growth post-2030.
Citi said the accelerating growth really changes the stock's fair value, noting that prior to last week's Nato conference, the UK defence budget was expected to reach 2.5% in 2027 and remain at that level.
"The new commitment to grow from circa 2.5% in 2029 to 3.5% in 2035 means that we lift our medium-term growth (years 6 -10) from 3% (in line with nominal GDP) to 9%," it said.
Analysts at Berenberg lowered their target price on industrial equipment rental company Ashtead Group from 7,000.0p to 6,000.0p on Monday but said the stock still held "high-quality rebound potential".
Berenberg said Ashtead's share price has "hit the trough", in its view, and thinks there are catalysts that could lead to upside risk to FY26 guidance. Berenberg, which reiterated its 'buy' rating on Ashtead, also said growth and margin drivers remained strong in the mid-term.
"We cut our price target for Ashtead from £70 to £60 on the back of our lower growth forecasts for FY 26, primarily due to construction environment uncertainty, but remain bullish about the group's upside potential," said Berenberg.
The German bank noted that Ashtead underperformed its peers in 2024, but said much of this was due to high end-market exposure to local markets, while the other limiting factor appeared to be soft acquisition spend.
"We think this could be a sign of another share buyback, which could limit the impact of index outflows from Ashtead's planned Q126 US listing," noted Berenberg.
The analysts also highlighted that the stock trades on a seven times enterprise value to underlying earnings ratio for the next twelve months - a 10% discount to its five-year history and a one-turn discount to rival United Rentals.
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