Investing.com -- BofA Global Research on Monday started coverage of Danish power cable maker NKT A/S with a "buy" rating and a 1,100 Danish crown price target, saying the company is one of only three major suppliers with the technology and expertise to meet rising demand for high-voltage direct current (HVDC) cables and installation.

The target implies 23% upside from the 893 Danish crowns cited in the report. BofA said NKT offers a relatively direct way to benefit from Europe’s spending on grid upgrades and electrification, alongside peers Prysmian and Nexans.

BofA values NKT at 10 times its estimated 2028 core earnings, about 20% below European electrification peers.

NKT currently trades below 8 times 2028 core earnings, versus about 12 times for peers, reflecting what BofA sees as higher risks from its heavy exposure to HVDC projects.

The bank expects NKT’s free cash flow to improve from a negative €127 million in 2026 to €211 million in 2028 as the company nears the end of a period of heavy investment in manufacturing capacity.

Earnings growth should increasingly outpace capital spending as large HVDC projects enter construction and start contributing to revenue.

BofA’s 2027 and 2028 EBITDA forecasts are about 3% above consensus, driven by stronger margins in NKT’s Transmission business. Its 2028 Transmission EBITDA forecast of €557 million is also about 3% above consensus.

BofA expects the industry’s shift towards 525 kilovolt XLPE cable technology from older mass-impregnated systems to support NKT’s market share gains.

NKT has almost full exposure to XLPE, while Nexans has a larger share of mass-impregnated capacity and slower plans to expand production, the bank said.

NKT had about €13 billion in high-voltage orders at the end of the second quarter of 2026, excluding a further €2 billion of commitments not yet booked.

Offshore wind accounted for about 30% of the backlog, while cross-border interconnectors represented about 70%.

BofA forecasts NKT’s sales will grow about 15% a year from 2025 to 2030, compared with 11% for Prysmian. It expects NKT’s group EBITDA margin to rise from 10.9% in 2025 to 17% in 2030.

Key risks to the price target include weaker European electrification demand, pricing pressure and unexpected policy-related costs. Faster volume and pricing growth, leading to stronger cash generation, are the main upside risks.

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