HSBC trims Centrica target price, says political will to intervene undiminished

HSBC trimmed its target price on shares of Centrica, telling clients that political intervention and commodity prices were set to weigh on the company's earnings.

"The political will to intervene in the UK supply market remains undiminished post the election in our view," the broker's analysts said.

Furthermore, they no longer saw any prospect for a recovery in NBP natural gas prices.

On a more positive note, they believed that upstream cost-cutting would allow the company to maintain metrics consistent with a long-term debt rating of A to 2019.

Yet even then it was hard to see how Centrica would be able to grow its dividend, they said.

Hence, they assumed it would remain flat at 12.0p per share for a flat dividend yield of 6%.

All of the above led the broker to lower its target on the shares from 200.0p to 187.0p while maintaining a recommendation to 'reduce'.