Jefferies has moved Redeia up a notch, upgrading the Spanish grid operator to Buy from Hold and lifting its target price to €16.50 from €15.80. At a reference price of €14.56, the new target implies roughly 13% upside.
The brokerage pointed to a substantial valuation disconnect: Redeia has lagged the European utilities index by about 50% over the past 12 months. Jefferies said that with the new regulatory framework in place and most near-term headwinds, in its view, already reflected in the share price, the stock now presents an appealing value opportunity.
Why Jefferies is looking beyond 2029
Central to Jefferies' revised stance is a shift in focus toward growth after 2029. Management currently guides to a 7.6% compound annual growth rate (CAGR) for the regulated asset base - RAB - over 2025-29. Jefferies, however, models somewhat stronger expansion, estimating RAB growth of about 9% over 2025-31. That expectation is underpinned by a pipeline of projects, notably a €2.2 billion investment in the Balearic Islands.
On earnings, Jefferies expects a period of muted near-term momentum followed by pickup later in the decade. Management guidance anticipates an EPS CAGR of roughly 1% across 2025-29; Jefferies projects this accelerating to about 3% across 2025-31.
Profitability and cash flow metrics in Jefferies' model show EBITDA at €1.27 billion in 2026 and €1.38 billion in 2027, up from €1,258 million in 2025. EPS is forecast at €0.93 in 2026 and €0.95 in 2027.
Risks and how they are priced
Jefferies argues that the principal headwinds - regulatory uncertainty, the prospect of an equity issuance, fines linked to a blackout, and tepid medium-term growth - are largely priced into the current share level. The final ENTSO-E report on the blackout described the event as multifactorial, with no single party clearly at fault, which Jefferies says reduces the likelihood of fines.
The firm also notes limited execution and inflation risk on Redeia's capital program. More than 70% of an approximately €6.5 billion capital expenditure plan to 2029 has already been fixed through supplier contracts. Under the regulatory framework, full cost recognition is allowed up to 105% of approved capex levels and partial recognition up to 115%.
Valuation and shareholder return
Relative valuation metrics show Redeia trading at roughly a 16% premium to its FY27 RAB, compared with a 25% average premium for other transmission system operators. The company is expected to offer a dividend yield of about 6% in FY26. Jefferies increased its valuation by around 4%, attributing that change mainly to a roughly 3% upgrade in its outlook for the Spanish transmission business. Combining the revised price target with dividend income, Jefferies expects total shareholder return of 19%.
Near-term and longer-term financial sensitivities
Interest-rate risk is cited as a near-term concern. Jefferies estimates that higher rates would reduce net income by approximately 1% in 2026-27. Over a longer horizon, refinancing at higher yields could elevate financing costs; the note contrasts a potential refinancing rate of 3.5% with the current average cost of about 2.2%.
Overall, the broker's upgrade rests on the combination of a depressed share price, greater visibility on cost recognition and contracts, and the expectation that RAB-led growth will strengthen after 2029.