Centrica PLC (LON:CNA) was upgraded by JPMorgan Cazenove as its shares are “trading in deep value territory” and the risk/reward is seen as being “skewed to the upside”.

Analysts at the investment bank, who moved their rating to ‘overweight’ from ‘equal weight’, said the company has clearly underperformed compared to its energy company peers with retail exposure over the past several years, with a demotion from the FTSE 100 in June to cap it off.

This is because of “failure to adapt meaningfully in the face of heightened competition and regulatory scrutiny in UK retail, exacerbated by exposure to commodities through upstream activities”.

But new management in the last six months has begun to turn things around, the analysts said, with business simplification and material restructuring, including a deal to sell its North American business for US$3.6bn and another to buy the energy supply customers of Robin Hood Energy.

This “should bring stability, if not growth, to the core, consumer facing business”, the JPM number crunchers reckon.

The analysts’ bear case assumption implies 25% downside to the current share price, with a base case that involves the target price being cut to 60p from 75p but still providing 50% upside, while a bull case sees 100% upside.

Centrica’s shares currently trade for 9.5 times 2021 forecast earnings and a 3.6 times multiples of EV/EBITDA, despite, it was pointed out, an unlevered balance sheet.

“Our main catalyst is FY20 earnings next year, where we expect to see the benefits of restructuring on earnings and a strategic update.

“In addition, execution of disposals of E&P and Nuclear should simplify the group and remove a major source of earnings volatility, driving a rerating.”