It has been a difficult couple of years for the Transurban Group (ASX: TCL) share price.
With its toll roads becoming a ghost town during the height of the pandemic, its earnings and distributions have suffered and this has put significant pressure on its shares.
Is the TCL share price about to get some TLC?
According to the team at Morgans, the Transurban share price could be heading a lot higher from current levels.
The note reveals that Transurban is one of its best ideas at the moment and could offer investors significant upside potential.
Morgans currently has an add rating and $14.57 price target on the toll road giant's shares. This implies potential upside of almost 13% over the next 12 months based on the current Transurban share price.
In addition, the broker is expecting the company to reward its shareholders with a 35 cents per share distribution in FY 2022. If we add this into the equation the total return stretches to beyond 15%.
And it is also worth noting that Morgans expects a big recovery in its distribution in FY 2023, with its analysts pencilling in a 58% increase to 55.3 cents per share.
Why is Morgans positive on Transurban share price?
Morgans is positive on the company due largely to its exposure to regional population and employment growth and urbanisation trends.
It explained: "TCL owns a pure play portfolio of toll road concession assets located in Melbourne, Sydney, Brisbane, and North America. This provides exposure to regional population and employment growth and urbanisation. Given very high EBITDA margins, earnings are driven by traffic growth (with recovery from COVID) and toll escalation (roughly half at CPI and the remainder fixed c.4% pa)."
"We think TCL will continue to be attractive to investors given its market cap weighting (important for passive index tracking flows), the high quality of its assets, management team, balance sheet, and growth prospects. Watch for rapid recovery in DPS alongside traffic recovery and WestConnex acquisition prospects," it concluded.
