RBC Capital Markets flagged up the investment potential of both National Grid (LON:NGG) and Pennon (LON:PNN) as it provided its assessment of the utilities sector.
It rates stock in both companies ‘outperform’ with a target price of £10.20 a share for the former and £11 for the latter – both valuations represent significant premia to the current share prices.
RBC said the switch to renewables will benefit transmission firms such as NGG.
The Canadian investment bank also had these words of reassurance on the outlook for the sector: “Investor concern around rising yields has been a key topic in the market.
“Analysing the relationship between regulated utilities and yields, we believe that European regulated utilities have underperformed the macro environment over the last six months and we see significant valuation upside as a result.”