SSE PLC (LSE:SSE) shares fell 0.8% after a UBS downgrade following a 50% rebound from February lows, helped by the pivot to electricity networks in its new five-year investment plan.
The Swiss bank raised its 12-month price target to 2,350p from 2,200p, but with just 7% implied upside from current levels, sees limited further runway and so downgraded the stock from 'buy' to 'neutral'.
Analyst Mark Freshney said the key risks around zonal pricing and regulatory asset base (RAB) growth in the next transmission price control (RIIO-T3) have been “mostly addressed.”
SSE has a plan to spend £33 billion in capital expenditure between March 2026 and 2030, while Freshney can only get to £26.3 billion on his spreadsheet.
"There are six major consents for overhead line which we expect to be slower to come, recognising recent slow planning and delays with large projects."
UBS forecasts earnings per share in 2030 of 233p still.
On the positive side, the analyst expects allowed returns for SSE’s transmission business to rise to 6% real (from 5.64%) in the final decision from regulator Ofgem on the RIIO-T3 period, due on 4 December. He sees upside potential in thermal assets, where plant life extensions at Marchwood and Keadby 2 add £200 million of value.
On valuation, the analyst sees the shares as "no longer cheap versus the sector".
With a 2.4% yield and FY27 P/E of 13x, SSE lacks the income support of peers like National Grid PLC (LSE:NG.), and UBS favours Ørsted for better risk-adjusted growth, trading on a cheaper 2028E EV/EBITDA multiple.