Citigroup upgrades Centrica, sees best value among UK utilities

“Despite the potential for short-term headwinds from the CMA energy investigation, with potentially negative headlines on tariffs, an end to evergreen tariffs and the introduction of a default tariff, we believe Centrica’s shares are already discounting such risks,” it said.

The bank said that in the context of a flat or falling wholesale commodity price environment, Centrica’s retail business, with its premium brand, should perform well.

Even in the context of increasing retail competition, Citi reckons a 4% EBIT margin is sustainable in the long-term.

It said that with an average free cash flow yield of 8% versus a sustainable dividend yield of 5.3%, as well as potential to beat its £750m cost-cutting target, Centrica is well placed in the context of the sector.

The bank trimmed its price target on the stock to 260p from 265p.

At 1210 GMT, Centrica shares were down 0.6% at 226.77p.