Broker tips: Prudential, National Grid, SSE

Deutsche Bank has cut its target price for insurance giant Prudential ahead of its results next week, but said the stock is still an "attractive" investment at the current valuation.

Ahead of the first-half results on 30 August, the broker refreshed its forecasts and, as a result, trimmed its target price from 1,550p to 1,540p. This, however, still implies significant upside from the current level of 963.8p, up 2.3% on Wednesday morning.

"Prudential will publish its 1H23 results next week, with the new CEO also to present his strategy - which we believe has taken a backseat in the shares in the current China macro environment," said analyst Rhea Shah.

"The shares have underperformed relative to main peer AIA Group and also UK Insurance peers in recent months. However, we continue to believe that Prudential can see exceptional sales growth this year and into next, with capacity for management to deploy for organic or inorganic growth if desired."

The stock, Shah says, trades at just.12 times 2024 estimated earnings (on a GBP, IFRS 17 basis).

RBC Capital Markets has cut its target prices for a host of UK utility stocks, but highlighted networks National Grid and SSE as its top picks in the sector.

The broker reiterated its 'outperform' rating for both stocks, but kept Pennon Group, Severn Trent and United Utilities at 'sector perform'.

"We see significant opportunity in NG and SSE as current valuations fail to differentiate between the UK network and water sectors. Higher and more visible growth, alongside a lower level of political focus are central to our positive view on networks," the broker said in a research note.

As for the water sector, RBC said the upcoming PR24 price review - which covers the period 2025 to 2030 - should give investors more clarity on companies' regulatory capital value. "However, we don’t expect to see any update on allowed returns or for companies to give an indication on their ability to outperform at this early stage in the regulatory process," the broker added.

National Grid was given a target price of 1,250p (unchanged), while Pennon's was cut from 975p to 875p, Severn Trent's was cut from 3,000p to 2,650p, SSE's was cut from 2,050p to 1,950p and United Utilities' was cut from 1,100p to 1,075p.