SSE PLC (LSE:SSE), the UK energy company, has been identified as one of the steadier energy transition plays in a recent research note from UBS.
The investment bank's research highlighted SSE's solid shape after a turbulent year, with a 25% increase in guidance for the current year and a strong outlook in both the networks and generation divisions.
UBS sees 13% "upside" to fair value for SSE's shares at a price target of £19.65, and estimates a 3-4% yield going forward, noting that the interim dividend has already been paid.
The networks are developing well, and the UK price control process is now settled, providing 4-5 years of certainty ahead, a positive point that Iberdrola has also highlighted.
The note also mentioned SSE's renewables and flexible generation portfolio, which continues to perform well. The flexible generation portfolio is rising in value, with spark spreads ticking up, and SSE has over 1 gigawatt of battery projects in the pipeline.
Additionally, potential catalysts in the Irish wind auction and the Coire Glas pumped hydro project could be beneficial for the company.
Overall, UBS sees a strong thesis based on energy transition, grids, renewables, and flexibility, with stable regulation and catalysts ahead.
The note concludes with a buy recommendation for SSE, stating that the company's B/S is now largely derisked, concerns over Scottish independence are fading, and there have been no further public calls for a break-up since the activist letter of 2021.