Jefferies has upgraded Centrica, the owner of British Gas, to 'buy' from 'hold', arguing that investors are overlooking the steady growth in most of its business.
The broker raised its price target to 200p from 190p, around 31% above Monday's closing price of 152.7p.
Centrica shares have fallen 16% since its half-year results in July, while market forecasts for 2027 earnings per share have dropped 11%.
Most of those downgrades followed weaker guidance for Centrica Energy, the group's commodity trading business.
Management now expects 2027 earnings before interest, tax, depreciation and amortisation (EBITDA) of around £250 million from the division, below the £320 million the market had expected.
It blamed the Middle East crisis for limiting its ability to redirect liquefied natural gas (LNG) cargoes.
Jefferies said the trading arm is the most volatile part of Centrica but accounts for only around 16% of forecast 2027 EBITDA.
The retail and infrastructure businesses make up around 85%, and their earnings are largely set by regulation or long-term contracts.
The broker expects earnings per share from those two divisions to rise from 7.8p this year to 14.7p in 2030.
That would lift group earnings per share by 13% a year over the period, even if trading profits stay flat.
Jefferies forecasts retail EBITDA rising from £549 million this year to £780 million by 2030, helped by cost savings at British Gas.
It expects bad debt, which recently rose above the level allowed by Ofgem, the energy regulator, to fall back below that allowance from 2028.
The broker also identified around 23p a share of potential value not included in its forecasts.
This includes extending the life of nuclear power stations, redeveloping the Rough gas storage site and a carbon storage project at Morecambe Bay.
Centrica trades on 11.3 times forecast 2027 earnings, compared with around 17 times for European utility peers.
