United Utilities Sets Fiscal 2023 Guidance Below Expectations Due to High Inflation; Shares Rich

We maintain our GBX 790 fair value estimate after no-moat United Utilities released fiscal 2022 results in line with Factset consensus, but set 2023 guidance below them, chiefly because of high inflation. The group intends to pay a final dividend of GBX 29 on fiscal 2022, implying a total dividend of GBX 43.50 and a 3.9% yield. The 2022 dividend is 0.6% above last year, in line with the Consumer Price Index including housing costs, or CPIH, between November 2019 and November 2020, included in the fiscal 2022 revenue. The group confirms its target of increasing the dividend in line with the CPIH through fiscal 2025, which is attractive in a high-inflation environment. However, this is more than priced in with a 2022 P/E of 20.7.