Deutsche downgrades UK water stocks

16th May 2017, 15:30

Deutsche Bank has moved to a neutral view on the UK water sector, believing return cuts are likely to come into focus.

The City heavyweight said: "Based on current returns the three UK waters still look attractive.

"However, we believe that cuts at the 2019 price review will come into focus by the end of the year."

Deutsche has therefore downgraded Severn Trent [LON:SVT] and United Utilities [LON:UU.] to hold (from buy) but nudged up their target prices to 2,450p (from 2,300p) and 1,050p (from 1,000p), respectively, believing both stocks look fairly valued.

Analysts also highlighted Pennon [LON:PNN] as their top pick in the sector and maintained their buy rating. Their target was lifted to 920p (from 900p).

At 3:30pm:

[LON:PNN] Pennon Group PLC share price was -0.75p at 872.75p

[LON:SVT] Severn Trent PLC share price was -34.5p at 2394.5p

[LON:UU.] United Utilities Group PLC share price was -13.5p at 1012.5p