Goldman Sachs names 6 global stocks to play the energy transition — giving one over 90% upside

Published Sun, Oct 1 20237:47 PM EDT

Amala Balakrishner @in/amala-balakrishner @_amalabk

Goldman Sachs is bullish on the bioenergy sector, calling it the "largest source of renewable energy in the world." In a Sept. 28 note, the U.S. investment bank pointed out that bioenergy has the "potential to decarbonize road, marine and air travel as well as heating, industry and power generation." Specifically, the bank's analysts, led by Michele Della Vigna, foresee growth in the areas of renewable diesel, sustainable aviation fuel, and renewable natural gas. They said all of these are seeing strong regulatory momentum and higher demand. For instance, renewable diesel — made from fats and oils processed to be similar to regular diesel — is expected to see a surge in its capacity of over 3 million metric tons in 2024, and 5-6 million metric tons of extra demand by 2030 following the EU's implementation of the Renewable Energy Direction III regulation. The new rules require the reduction of gaseous and liquid fuels used by the transport sector in particular. Sustainable aviation fuel is also touted as a way forward in decarbonizing air transport, and a few players with healthy margins are likely to dominate the market between 2025 and 2027, Goldman's analysts said. Stock picks Several global stocks are slated to benefit from this push toward sustainability and the transition to renewable energy, Goldman said. Among its top picks is Neste , which it describes as the "biggest renewable diesel and sustainable aviation fuel producer in the world." The bank has a buy rating on the Finnish oil refining and marketing company and expects it to have significant market share and healthy sustainable aviation fuel margins into 2025. The bank gives Neste a potential upside of over 42% — or the percentage difference between its current share price and target price of 46 euros ($48.82) — over the next 12 months. Similarly, Italian biofuel company ENI is buy-rated by Goldman, with an upside of 10.3% from a price target of 17 euros. The bank notes that the company — which has two large-scale biofuel refineries in Italy and the U.S. — currently accounts for approximately 10% of the global renewable diesel production capacity. Meanwhile, American company Darling Ingredients also received a buy rating from Goldman and a target price of $102 — giving it a 95% upside from its Sept. 28 close. The company turns edible by-products and food waste into sustainable products and is the largest renewable diesel producer in North America. — CNBC's Katrina Bishop contributed to this report.