Stock Analysis & Valuation Sempra (0L5A.L)

• Previous Close: £86.91
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	34.70	-60
Intrinsic value (DCF)	31.53	-64
Graham-Dodd Method	25.00	-71
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Sempra (0L5A.L) is a leading energy-services holding company operating in the United States and internationally. Headquartered in San Diego, California, Sempra provides essential utility services through its subsidiaries, including San Diego Gas & Electric (SDG&E), Southern California Gas Company (SoCalGas), and Sempra Texas Utilities. The company serves millions of customers, delivering electricity and natural gas across expansive service territories. SDG&E supplies electricity to 3.6 million people and natural gas to 3.3 million across 4,100 square miles, while SoCalGas operates one of the largest natural gas distribution networks in the U.S., serving 22 million people over 24,000 square miles. Sempra Texas Utilities manages a vast transmission and distribution network, powering 3.8 million homes and businesses. With a strong focus on regulated utilities and infrastructure, Sempra plays a critical role in the U.S. energy sector, emphasizing reliability, sustainability, and growth in clean energy solutions. The company’s diversified operations and strategic investments in transmission and renewable energy position it as a key player in the transition toward a lower-carbon future.

Investment Summary

Sempra presents a stable investment opportunity within the utilities sector, supported by its regulated business model, which provides predictable cash flows and a solid dividend yield (currently $2.505 per share). The company’s diversified operations across electricity and natural gas distribution mitigate regional risks, while its focus on infrastructure expansion and renewable energy aligns with long-term regulatory and environmental trends. However, high capital expenditures ($8.2 billion in FY 2024) and substantial total debt ($36.1 billion) could pressure financial flexibility. Additionally, regulatory scrutiny in California and exposure to natural gas price volatility may pose risks. With a beta of 0.642, Sempra offers lower volatility compared to the broader market, appealing to conservative investors seeking steady returns in the utilities space.

Competitive Analysis

Sempra’s competitive advantage lies in its geographically diversified utility operations, strong regulatory frameworks, and investments in critical energy infrastructure. Unlike pure-play electric utilities, Sempra benefits from dual exposure to electricity and natural gas, providing resilience against demand fluctuations. Its subsidiaries, SDG&E and SoCalGas, operate in high-growth regions with increasing demand for clean energy, supported by California’s aggressive decarbonization policies. Sempra Texas Utilities further diversifies its revenue base, reducing reliance on any single market. The company’s extensive transmission network (18,249 circuit miles) and interconnection capabilities enhance grid reliability and support renewable integration. However, competition arises from other large regulated utilities and independent power producers expanding into renewable energy. Sempra’s scale and regulatory expertise provide a moat, but rising capital costs and regulatory delays could challenge its growth trajectory. Its focus on LNG exports through Sempra Infrastructure also differentiates it, though this segment faces global competition and commodity price risks.

Major Competitors

• NextEra Energy (NEE): NextEra Energy is a leader in renewable energy, with a massive portfolio of wind and solar assets. Its Florida Power & Light subsidiary provides regulated utility services, while NextEra Energy Resources dominates the competitive wholesale market. Sempra lacks NextEra’s scale in renewables but benefits from a more diversified gas-electric mix. NextEra’s aggressive growth strategy poses a long-term competitive threat.
• Southern Company (SO): Southern Company operates regulated utilities in the Southeast, with a growing focus on renewables and nuclear energy. Its vertically integrated model contrasts with Sempra’s multi-state approach. Southern’s recent Vogtle nuclear plant expansion demonstrates its capital-intensive strategy, whereas Sempra prioritizes gas infrastructure and LNG. Both face regulatory risks, but Sempra’s California exposure adds unique challenges.
• Duke Energy (DUK): Duke Energy serves 7.9 million customers across the Midwest and Southeast, with a balanced mix of gas, coal, and renewables. Like Sempra, Duke operates in regulated markets but lacks Sempra’s West Coast presence. Duke’s larger customer base provides economies of scale, but its slower renewable transition compared to Sempra’s California-focused initiatives may lag in long-term sustainability.
• PG&E Corporation (PCG): PG&E is a California-focused utility competing directly with Sempra’s SDG&E and SoCalGas. PG&E’s bankruptcy in 2019 due to wildfire liabilities highlights regulatory risks in the state. Sempra’s stronger financial position and diversified operations give it an edge, though both face similar climate-related pressures. PG&E’s larger service area offers growth potential if it stabilizes its balance sheet.
• American Electric Power (AEP): AEP operates in 11 states, with a heavy reliance on coal-fired generation. Its slower pivot to renewables contrasts with Sempra’s cleaner portfolio. AEP’s vast transmission network is a strength, but Sempra’s integrated gas-electric model provides more flexibility in energy transitions. Regulatory headwinds for coal-dependent utilities could disadvantage AEP relative to Sempra.