Severn Trent PLC (LSE: SVT)

Severn Trent PLC (LSE: SVT) is an FTSE-100 listed Utility Company, which deals in providing water & waste services and developing renewable energy solutions. This Report covers the Investment Highlights, Conclusion, and Recommendation on the stock.

On 24 May 2023, the Company will release FY23 results for the 12 months ended 31 March 2023.

Investment Rationale – Sell at GBX 2,981.00

• Profit Booking: SVT’s stock price came very close to the R1 level suggested in the previous report published on 10 March 2023. Therefore, it is presenting a profit booking opportunity.
• Unfavourable Financial Metrics: The Company’s current ratio of 0.77x during H1 FY23 remained lower than its industry median of 1.66x, illustrating higher risk of distress and default when compared with the industry. Moreover, the debt-equity of around 5.89x in H1 FY23 remained ahead of its industry median of 2.43x, indicating that the Company is borrowing more money from the market when compared with the industry.
• Macroeconomic Uncertainties: SVT's performance is susceptible to inability to deliver expected acquisition synergies, economic recession, volatile equity markets, high levels of inflation, and rising interest rates.
• Technical Indication: The 14 days RSI of ~66.66 illustrates that the stock price has approached an overbought territory and indicates a correction in the stock price.

Share Price Chart  

Conclusion

Based on the lower current ratio than its industry median, macroeconomic challenges, and price action stance, a "SELL" recommendation on  Severn Trent PLC has been given at the current market price of GBX 2,981.00 (as of 12 April 2023 at 09:15 AM GMT+1).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 12 April 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.

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