Balfour Beatty plc (LSE:BBY), the UK construction and infrastructure group, has received a reiterated Buy rating and 1,000p price target from broker Panmure Liberum amid accelerating electricity grid investment.
Analyst Joe Brent highlighted the company’s strong positioning in Britain’s transmission network upgrade cycle, which Ofgem estimates could require up to £70 billion in investment between April 2025 and March 2031.
Panmure Liberum’s assessment follows a site visit to Balfour Beatty’s Bramford to Twinstead project in Suffolk, where the group is delivering a £363 million contract for National Grid.
The project involves replacing an existing high-voltage connection with a new 400-kilovolt link spanning 29 kilometres, incorporating both overhead lines and underground cables.
The broker forecasts transmission industry spending could grow at an annual rate of approximately 20% between 2025 and 2030, reflecting the scale of the UK’s grid modernisation ambitions.
The three UK transmission owners have outlined significant capital expenditure plans through 2031, including £35 billion from National Grid, £29 billion from SSE and up to £12 billion from SP Energy Networks.
Balfour Beatty holds framework positions with all three transmission owners and commands roughly a 25% share of the transmission market, providing access to a substantial and growing project pipeline.
Beyond transmission, the broker also identified opportunities in electricity distribution, where Balfour Beatty holds approximately 10% market share and management expects volumes to increase significantly from 2028.
However, a shortage of skilled workers remains a key constraint on the group’s ability to convert rising infrastructure demand into additional revenue at pace.
Supply chain timing presents a further operational challenge, with underground cables carrying around 18-month lead times and conductors requiring approximately two years from order to delivery.
Balfour Beatty is addressing procurement risks by ordering equipment early, securing exclusive supply-chain agreements and drawing on its in-house manufacturing capabilities to reduce exposure to delays.
Panmure Liberum also endorsed the group’s recent £250 million sale of its 50% stake in Gammon Construction, describing the disposal as strategically sensible given prevailing concerns about the Hong Kong market.
The transaction is expected to bolster Balfour Beatty’s cash position and could pave the way for a larger share buyback programme when management updates investors in December.
Panmure Liberum’s 1,000p price target represents meaningful upside against the 825p share price recorded at 9.25am on 16 October, with forecasts pointing to earnings growth in 2027 as infrastructure investment continues to accelerate.
