Too cheap to ignore – reiterate Buy

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Too cheap to ignore – reiterate Buy

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Pennon

Reiterate Rating: BUY | PO: 600.00 GBp | Price: 481.60 GBp

Shares trade at RCV despite growth and value creation 06 July 2026

Following FY25/26 results and several weeks of newsflow on UK politics, we fully revise Equity

our estimates and reiterate our Buy recommendation on Pennon with a new 600p PO

(implying >30% TSR potential). On our numbers, shares trade at 0% premium to

Key Changesregulated assets, despite delivering 34% RAB growth over AMP8, at returns that are

more protected to the downside than in previous regulatory periods. In our view, the (GBp) Previous Current

strategic update from new CEO Keith Haslett in Sep-2026, will be an opportunity to 1) Price Obj. 610.00 600.00

rebase expectations on achieved returns and 2) announce rotations of non-core assets 2027E EPS 37.19 29.24

which could open up more reopener capex potential. Our estimates sit ~4% below cons 2028E EPS 41.22 34.04

reflecting higher operating costs implied in the FY26/27 guide. 2029E EPS 41.10 32.55

2027E DPS 29.91 29.99

£250mn of reopener capex challenged by affordability…

In line with peers such as United Utilities and Severn Trent, Pennon requested additional Julius Nickelsen, CFA >>

Research Analyst

investments as part of the annual reopener process. The total amount for the 2026 MLI (UK)

reopener stands at £250mn, which on our numbers would see Pennon’s AMP8 asset +44 20 7995 6027 julius.nickelsen@bofa.com

base CAGR increase by 80bps to 7% (vs UU at 10% and SVT at 11%). Nevertheless, the

Peter Bisztyga >>

company flagged that 1) it would only invest the amount if Ofwat would provide in-AMP Research Analyst

remuneration (challenging amidst affordability concerns in the UK) and 2) it entered MLI (UK) +44 20 7995 0535