Costain Group is going nuclear so will its undervalued shares react similarly? They touched a year’s High of 130.80p yesterday, now just 128.60p, brokers TP 150p

11.06.2025

After she found a new ‘money tree’ from goodness knows where - Chancellor Rachel Reeves is today expected to launch a £30bn spending programme – one of the beneficiaries is likely to be the Costain Group (LON:COST) the undervalued infrastructure specialist.

Yesterday Reeves declared that she was welcoming a new era of nuclear power, with some £14.2bn being confirmed as the investment covering the first four years of a ten-year project for the Sizewell C nuclear plant in Suffolk.

Aimed at creating enough energy for six million homes, Sizewell C was actually licenced last year by the Conservatives for the French state-controlled energy group EDF.

Ten-Year Framework

It was in late February this year that the group announced that it had been awarded a multi-million-pound framework to support the construction of Sizewell C, the new nuclear power station which is expected to be one of the biggest net zero projects in the UK.

The ten-year framework will see Costain provide resource across three areas: delivery integration, quality and engineering integration.

The 3.2-gigawatt nuclear power station will support a more resilient and decarbonised UK and is expected to be one of the country’s biggest net zero projects by helping to generate low-carbon electricity for those six million homes.

Costain will apply its expertise to ensure best-in-class delivery in areas including health and safety, programme management and quality control, all in close partnership with Sizewell C, its delivery partners and the local supply chain.

At that time Bob Anstey, Costain’s Director of Defence and Nuclear Energy, stated that:

“This project is a vital part of creating a sustainable future.

We have a long and successful track record in delivering for our civil nuclear customers, with a highly qualified and experienced workforce that consistently works to the highest safety and quality standards.

A key part of our role will be to help ensure the project leaves a positive legacy, and we look forward to working closely with Sizewell C on a range of social value and employment initiatives that improve lives and provide long-term benefits to local communities.”

Costain was also involved in Sizewell B, where it has a contract with EDF Energy to provide project controls and support for various nuclear power stations, including work on the Long-Term Operation for Sizewell B.

Additionally, Costain had secured a separate contract to support the construction of the Sizewell C nuclear power plant, which is located near Sizewell B. 

The Business

Costain helps to improve people's lives by creating connected, sustainable infrastructure that enables people and the planet to thrive.

It shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem across the UK's transport, energy, water, and defence markets.

The group is organised around its customers anticipating and solving their challenges and helping to improve performance.

By bringing together Costain’s unique mix of construction, consulting and digital experts it helps to engineer and deliver sustainable, efficient and practical solutions.

In its mid-May AGM Trading Update the company reported that it had seen a £1.5bn increase in its forward work position to close 2024 at a record £5.4bn, while still bidding busily for further new work across all sectors and broadening its customer mix.

Nuclear Energy Contracts

In that Update the group highlighted new contracts in Nuclear Energy:

Urenco: a programme delivery partner framework to deliver new and upgraded infrastructure at its Cheshire site and is Costain's first contract with Urenco as it expands capacity as a key enabler for the UK's decarbonised energy system;

Urenco: an additional design services FEED for the first commercial scale high-assay low-enriched uranium facility to be built in the UK;

Sizewell C: a ten-year framework to provide engineering, project delivery and quality control expertise to support the construction of the new nuclear power station, expected to be one of the biggest net zero projects in the UK; and

Department for Energy Security & Net Zero: provision of technical expertise and strategic consultancy services on the Nuclear and Emerging Technologies lots within the Energy and Net Zero Professional Services Framework.

Broker’s Views

Analysts Joe Brent and Joe Walker, at Panmure Liberum, rate the group’s shares as a Buy, with a 150p Target Price.

Just three weeks ago they stated that the business is operating effectively and based on margin ambitions, should be capable of creating fully diluted earnings of some 20p per share.

Their estimates for this year to end-December should show sales of £1,260m (£1,251m) with pre-tax profits of £52.1m (£48.5m), generating earnings of 14.3p (14.4p) and paying out a dividend of 2.6p (2.4p) per share.

For 2026 they see £1,275m sales, £56.7m profits, 15.5p earnings and 2.8p dividend per share.

A good kick upwards shows through in 2027 with £1,413m sales, £63.3m profits, 17.3p earnings and a 3.1p per share dividend.

My View

Costain will be announcing its Interim results to end-June 2025 on Wednesday 20th August 2025.

Before then I expect that the group’s shares will have moved clearly above its current price of 129p, heading up to test the 150p level and then higher still.

(Profile 05.09.19 @ 155p set a Target Price of 250p)

(Profile 02.08.21 @ 55p set a Target Price of 69p*)

(Profile 24.08.23 @ 50p set a Target Price of 62p*)

(Profile 07.03.25 @ 105p set a Target Price of 135p)

Reactor Dome of the Sizewell B nuclear power station, next to the site of the forthcoming Sizewell C power station.

Asterisks * denote that Target Prices have been achieved since Profile publication.