Source: Sharecast
"As we highlighted when we downgraded NG to neutral, we continue to like the company's RAV and earnings growth profile, which is largely underpinned by investments with political and regulatory support, and that we would have no hesitation to step back into the shares should there be any unjustified sell-off given these strong fundamentals," the bank said.
"We are now stepping back in. In our view, the political and regulatory support remain robust as we head into RIIO ET3, as is NG's balance sheet."
In addition, Citi said that a combination of strong USD, re-rating of US regulated assets and Citi's house-view of second-hal interest rate cuts provide an attractive proposition for investors.
The bank also upgraded SSE, to ‘neutral’ from ‘sell’ following a period of underperformance, with the shares down 17% over the last three months.
"Our more bearish view back in October reflected the mis-match between the valuation and the risk of balance sheet concerns, as well as potential risk around REMA/zonal pricing," it said.
Citi said that given the share price weakness, it believes some of these risks are now better reflected in the shares given what it knows today.
"While we still see need for SSE to address its long-term funding structure (asset sales/hybrids/equity), the lack of immediate action given the pending change of management and ongoing RIIO ET3 review is unlikely to delivery this clarity," it said.
"In addition, we await for further government visibility on zonal pricing."
Citi said that until these key questions are answered, along with progress to deliver 175-200p 2026/27 earnings per share, it struggles to see the shares moving meaningfully in either direction.
At 0840 GMT, National Grid shares were up 0.9% at 972p, while SSE shares were 0.1% higher at 1,597.75p.