UBS has lowered its view on the UK energy company SSE. It moved the rating from buy to neutral. This happened because the share price has already gone up a lot. UBS still raised its one year price target from 2200 pence to 2350 pence. But even with the new target, the upside is only around seven percent. That is why the rating changed.
SSE’s share price has been on a very strong run this year. It has risen thirty seven percent since January and fifty percent since its low point in February 2025. The whole utilities sector has gone up much less. Because of this big rise, UBS believes many earlier worries are already reflected in the price. This includes concerns about funding and future rules for energy pricing and investment.
UBS says the main issue now is valuation. In simple words, the stock does not look cheap anymore. It pointed out that SSE’s cash dividend yield is about two point four percent while National Grid offers three point two percent. UBS also said it may take around ten years for SSE to reach the sector’s average yield of four point five percent. The expected price-to-earnings ratio for March 2027 is around 13 times.
UBS also updated its expectations based on SSE’s new plan to spend thirty three billion pounds between 2026 and 2030. UBS decided to model only about twenty six billion pounds of that amount. It expects less spending on transmission and slightly more on renewables. It also thinks some major transmission projects may take longer to get approval. These lines are expected to cost between thirteen and fifteen billion pounds and approval is due in mid 2026.
The analysts raised their forecast for what SSE can earn from regulated transmission work. They now expect returns to rise from about five point six percent to about six percent in real terms. This boosts their estimate of SSE’s asset base and future earnings. UBS values the transmission business at more than half above the expected asset value in 2027. It also assumes a healthy gap between what the company earns and its cost of capital.
The higher price target also comes from better expected returns in the distribution business. UBS added one billion pounds more to expected spending there. It also increased the value of SSE’s gas power plants because their operating life was extended by five years. Even so, some of this gain was reduced because SSE issued nearly ninety eight million new shares at two thousand fifty pence each, which slightly diluted the value.
UBS also noted that spending on renewable energy has been cut sharply. SSE now plans to spend only four billion pounds on renewables. This is the lowest in five years and much lower than earlier plans. Only half of a major offshore wind project called Berwick Bank is included in this figure.
UBS expects SSE to earn about two hundred thirty three pence per share by March 2030. This fits within the company’s own target. It also expects earnings to grow around seven percent each year. But the firm says these positives are balanced out by higher debt and a share price that already looks expensive.