HSBC upgrades Centrica, pointing to diminished political risk

8th May 2015 15:07

HSBC upgraded Centrica to hold from reduce on Friday and raised the target price to 300p from 240p, pointing to diminished prospects for direct government intervention in the supply market after the Conservative election victory."The political risk has now reduced" said HSBC. There had been concerns that if Labour got into power they would cap energy prices.Another factor behind the upgrade is the improvement in the company's balance sheet."We expect Centrica's free cash flow to improve, with a run-rate of around over £1bn (before dividends) from 2016 onwards," said HSBC. In addition, it expects net debt to come down by £983m in 2015.On the downside, HSBC highlighted that risks remain with the conclusions of the Competition and Markets Authority's investigation into the energy market due in late Spring.