Citi upgrades Qinetiq to 'buy', shares rally

The bank noted that Qinetiq has lost around £500m market cap following a £14.5m writedown on a complex project in its interim results.

"While we accept there remains significant risk for investors on both this contract and potentially the risk management process, we also believe that 1) this is more than priced in and 2) over the next 6-12 months, these risks are likely to be retired/subside, driving a rerating in the shares," it said.

Citi said that it has assumed the write-down was a "one-off problem", but also cut its price target on the shares to 340p from 370p and increased the risk rating to "high".

At 1050 GMT, the shares were up 4.2% at 255.40p.