Kier Group price target lifted to 330p by RBC after strategic update

Kier Group PLC (LSE:KIE), the UK infrastructure and construction contractor, has had its price target raised to 330p from 215p by RBC Capital Markets following the company’s recent strategic update. RBC retained its Sector Perform rating, saying Kier’s shares have already risen about 27% since the update and now offer limited further upside against the new valuation.

The broker increased its adjusted earnings per share forecasts for the 2027, 2028 and 2029 financial years by 4.8%, 11.3% and 30% respectively. The upgrades reflect stronger revenue expectations, lower interest costs and the assumption that Kier will continue buying back shares.

RBC said the company’s new medium-term targets point to stronger growth across UK infrastructure, particularly in water, defence, energy and healthcare. The broker now expects group revenue to reach about £5.1 billion by the 2029 financial year, representing annual growth of about 5%. Excluding HS2, RBC forecasts revenue growth of 8.2% a year between 2026 and 2029, up from its previous estimate of 4.4%. RBC also expects the decline in HS2 work to be slower than previously assumed, giving Kier more time to replace the revenue with work from other infrastructure markets.

Margins are expected to remain broadly flat in the near term, with RBC forecasting an adjusted operating margin of 3.9% through 2029 despite Kier’s longer-term target of 4% to 4.5%.

The broker said Kier’s decision to exit property development should strengthen the balance sheet and accelerate its ability to return capital to shareholders. RBC forecasts about £450 million of cumulative free cash flow after dividends through 2029, helped by roughly £160 million of proceeds from property disposals and lower interest costs. Repayment of Kier’s £250 million bond carrying a 9% coupon in March 2028 remains the main capital allocation priority, after which RBC sees greater scope for acquisitions, investment or further buybacks.

RBC’s 330p price target is based on a sum-of-the-parts valuation, while its more optimistic scenario reaches 380p if revenue growth is stronger and the bond is repaid earlier.