Double upgrade for SSE as Deutsche sees buying opportunity

Deutsche Bank upgraded SSE to 'buy' from 'sell' on Wednesday, lifting the price target to 1,250p from 1,200p after shares tanked last week on the back of a profit warning

DB said the reaction to the profit warning was a buying opportunity.

"SSE's shares have been marked down following last week's profit warning yet we think underlying value has gone up since May. The impact of Ofgem's retail price cap now looks priced in while rising gas prices should increase long term generation value despite causing short term trading losses."

Deutsche also argued that SSE's networks and renewable generation are fundamentally good businesses.

SSE cautioned last week that first-half profits were likely to have halved compared to last year due to higher costs and lower volumes of energy being consumed, but promised that the dividend would be unaffected.

"Lower than expected output of renewable energy and higher than expected gas prices mean that SSE's financial performance in the first five months has been disappointing and regrettable," said chief executive Alistair Phillips-Davies.

"The underlying quality of SSE's businesses remains strong, with regulated networks and renewables providing the core of what will be an infrastructure-focused SSE group in the years ahead."

At 1000 BST, the shares were down 0.3% to 1,120p.