Broker snap: Credit Suisse raises target for SSE

2nd Mar 2012 09:39

Credit Suisse has raised its target price for gas and electricity group SSE from 1,400p to 1,450p, saying that the CO2 floor price should drive up the group's profitability."Despite tough markets, the quality of SSE's Generation fleet has enabled it to keep earnings flat," analysts said.The broker sees the CO2 floor price as a potential positive for SSE, as it should benefit from the high power prices that it would bring. "Positive action by other UK utilities to offset the impact of lost free CO2 emission permits may provide further upside."The stock trades at 12.8 times next year's earnings, falling to 10.7 times for the year ending March 2015. "While more expensive than pan-European integrateds, SSE trades in line with fixed-cost generators and regulated utilities, which we believe are its closer comparators. SSE has exposure to more favourable fundamentals, on our analysis, and hence should trade on a premium to peers in our view." An outperform rating is retained.BC