EUR 300.00 For Business Accounts Only

Endesa: Strategy makes sense, upside is limited

We are raising our estimates for Endesa following its 2019/21 strategic update, while also incorporating our recently published power price scenario for Iberia, resulting in an avg +4% increase in Net Income/EBITDA estimates for the 18E/21E period. We are also increasing our capex estimates as Endesa announced an increase in its renewables installation objective in Spain (19E/21E installations of 1.9GW). Actually, in our view, this was the key message of the strategic update: increase investments in renewables to achieve higher long-term EBITDA (and net income) levels. For us, this move makes sense from a strategic point of view, but the company’s decision to abandon its 100% payout policy from 21E onwards, despite having some rationale, may have raised some eyebrows and could explain the share price’s negative reaction on the day (-2.6% vs IBEX +1.1%). Together with the estimates revisions we also rolled over our FV of Endesa to 2019, which we currently see as a good quality company, with a (still) sound dividend outlook, but whose bullish points are well recognized by the market. We raise our FV for Endesa to Eur20.6/sh (+3% vs prev), but reiterate our Neutral recommendation.