Pennon Group (PNN.L)

Research evidence excerpt

Pennon Group (PNN.L)

Equity Research

17 July 2026 | 2:00PM BST

Pennon Group (PNN.L): Minor estimate changes

We update our estimates to reflect minor changes in our interest and regulatory cost Ajay Patel

+44(20)7552-1168 | ajay.patel@gs.com

forecasts (Infrastructure renewal expenditure). As a result, we decrease our EPS Goldman Sachs International

estimates by <1% on average over FY 2027-29. We remain Neutral rated on Pennon Lawrence Lavizani

with a revised 12-month price target of 569p (from 568p). +44(20)7051-1060lawrence.lavizani@gs.com|

Goldman Sachs International

Exhibit 1: We revise our estimates for Pennon Alberto Gandolfi +39(02)8022-0157 |

£mn, £p alberto.gandolfi@gs.com

Goldman Sachs Bank Europe SE - Milan

2027E 2028E 2029E branch

EBIT Old 347 385 417

EBIT New 347 385 417

Change (%) 0.0% 0.0% 0.0%

EPS Old 28.10 33.02 35.79

EPS New 28.32 33.3 36.0

Change (%) 0.8% 0.7% 0.7%

Source: Goldman Sachs Global Investment Research

Investment Thesis

Higher rates, increased regulatory risk, EPS downgrades and limited investment

opportunity leave the UK water sector as less appealing relative to its European

peers in our coverage, in our view. While Pennon’s valuation is not demanding among

the water stocks, we see headwinds ahead in the form of regulatory risk and lagging

environmental performance, with an uncertain timeline for resolution. We are

Neutral rated on the basis of this regulatory risk and increasing costs of financing,

despite a discounted valuation and improving operational performance.

Valuation and Key Risks

We are Neutral rated on Pennon with a 12-month price target of 569p (from 568p).

Our price target is derived from an SoTP valuation. The key risks to our thesis and

price target are lower/higher RPI/CPIH inflation and lower/higher interest rates.