AGL Energy Ltd (ASX: AGL) is an underperforming ASX utilities stock.
In 2025, the S&P/ASX 200 Utilities (ASX:XUJ) index is up a healthy 7%.
Meanwhile, AGL shares have fallen almost 19%.
The company remains one of the top 5 largest utilities stocks by market capitalisation.
After falling significantly this year, the team at Ord Minnett has reiterated a buy recommendation on the ASX utilities stock along with an attractive price target.
Here is the latest from the wealth management firm.
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Increased confidence
Ord Minnett said after recently attending the AGL Energy investor day, it came away with greater confidence in its already positive view on the company's investment proposition.
Yesterday's report noted a highlight of the day was seeing how AGL's investment of more than $800 million in recent years has allowed the development of flexible generation capacity of 3.3 gigawatts (GW) at Bayswater.
Ord Minnett said trials in October successfully took coal generation units offline and then put them back online within five minutes, thereby matching the flexibility inherent in gas-powered electricity generation.
In effect, these developments mean AGL can optimise margins by shutting down and restarting its generation units between demand peaks as required.
According to the company, testing during October showed that applying the new operating pattern across four generation units for 100 similar days equated to circa $25 million in annualised earnings.
AGL expects Bayswater to remain the lowest-cost generator in NSW given recent spot coal contracts struck by the company, its additional flexible capacity, and high availability rates. This position, and new pricing for supply to the Tomago aluminium smelter from 2028, indicates material upside to earnings forecasts.
Raised earnings and price target
Following the investor day, Ord Minnett raised FY26 EPS estimates by 6.1% to incorporate wider electricity margins partially offset by higher growth capital expenditure.
Meanwhile, forecasts for FY27 and FY28 have been trimmed 0.5% and 0.2%, respectively.
It has upgraded its target price on this ASX utilities stock to $13.00 from $12.00. It reiterated its buy recommendation.
Based on yesterday's closing price of $9.26, this indicates an upside of 40.38%.
Elsewhere, it seems other analysts and brokers are tipping a similar rebound.
Late last month, Macquarie placed a price guide of $11 on the ASX utilities stock.
TradingView has a one year price target of $11.41.
