JPMorgan upgrades SSE to 'overweight'

Within a challenging backdrop for the sector, the bank said it believes large integrated utilities with scale and experience such as SSE should be more highly valued than in the past.

"The company’s portfolio of assets looks highly attractive," it said. "Renewables are the key to solving the energy trilemma, striking the balance of security of supply (away from imported gas), affordability and sustainability."

JPM said it sees electricity networks as the backbone of the energy transition, with significant investment needed to meet government climate ambitions, including 50GW of offshore wind by 2030.

"Finally, flexible dispatchable generation assets can respond to market volatility, driving financial performance. In this context, we think today’s share price discounts a harsh outcome on government intervention in wholesale electricity prices, and/or under appreciates SSE’s networks growth profile."

JPM noted that its FY23 earnings per share sits 5% ahead of Bloomberg consensus, while its FY26 estimate sits toward the top end of guidance.

The bank also said it was placing SSE on "positive catalyst watch", given several upcoming events into year-end, which it reckons could drive a re-rating.

JPM retained its ‘overweight’ rating on Drax and Centrica.