MS sees 2024 pickup for renewables in strong utilities sector

ERG

11/12/2023 07:54

** Morgan Stanley says pure renewable utilities are best
positioned for 2024 in an attractively valued sector thanks to
policy support, stable interest rates and bond yields
    ** The European market is safer than the U.S. due to the
upcoming U.S. elections, the broker says, and picks large caps
as more defensive and better quality than smaller peers
    ** MS chooses "overweight"-rated SSE  SSE.L , Engie
 ENGIE.PA  and Severn Trent  SVT.L  as its top picks
    ** It says SSE has a "world-leading network asset base
growth" with unappreciated renewables option value
    ** MS expects Engie to deliver a meaningful earnings upside
in 2024 and 2026 and a potential guidance upgrade after the
removal of restrictions on its Elecrtabel assets
    ** Severn Trent is "well placed to drive unprecedented real
asset base growth in next regulatory period", the broker adds
    ** MS downgrades Endesa  ELE.MC , ERG  ERG.MI  and Encavis
 ECVG.DE  to "underweight" from "equal-weight" 
    ** It notes Endesa trades at a 10% premium to peers despite
a risk of being penalised by government policy
    ** ERG's pipeline growth is already priced in and may be
lower than for some of its peers, it says
    ** MS expects higher rates to weigh on Encavis and add cost
burden to its business model

 (Reporting by Alessandro Parodi)
 ((alessandro.parodi@thomsonreuters.com))