SSE PLC (LSE:SSE) has received a hefty price target upgrade from analysts at UBS, who said the market has yet to fully recognise how much the business has changed in recent years.
Upping their target to 1,950p, from 1,650p, the Swiss bank's analysts said SSE's current share price does not reflect its fast-growing renewables business, exit from retail activity, asset growth in the regulated network division, and a supportive backdrop for its thermal generation and trading businesses.
Even on its worst-case forecasts of electricity prices at £55 Mwh/hour, or £100Mw/h lower than base estimates, the UBS analysts noted that their price target is still 1,640p.
SSE is a better bet than other utilities, they argued, though investors seeking protection from a UK recession might prefer National Grid while British Gas owner Centrica offers more commodity exposure.
The analysts said they see SSE as falling “somewhere between these two”, with good exposure to power prices for the next three years, and potential earnings growth of 7%-10% annually for the next five years, giving it more balance than the others and thus making it more attractive.
SSE, which is rated a 'buy', was down slightly at 1,704p on Thursday afternoon, while Centrica was 0.9% off at 97p, and National Grid was flat at 1,031p.