Indra: IT struggles lead us to downgrade
Although we remain convinced about the success of Indra’s turnaround plan, we think progress is happening at a slower pace than we expected owing to the structural issues in the IT business, namely the lack of scale and slower product development. As we cut our EBIT 18E-19E by 26% and 27% our FV is reduced from €15.7 to €12.4, thus we downgrade the shares from Buy to NEUTRAL. Market expectations have adjusted to the more conservative expectations; shares are down 12% since early October (IBEX -2%) and 2018E EBIT/EPS Bloomberg consensus have fallen by 19% and 20%, but we are still 5% below Blomberg consensus for 2018E EBIT. From 2019E onwards though the outlook looks more robust, revenue/EBIT headwinds start to fade, valuation becomes more supportive, with 2019E P/E and EV/EBIT at 22% and 9% discounts vs peers respectively and visibility on the delivery of the Business Plan should improve. However the flattish earnings momentum in 2018E should cap the upside in the short term.Indra Sistemas is engaged in the design, development, manufacture, assembly, repair, and installation of computer software and applications. Through its subsidiaries, Co. is engaged in consulting, graphic design and multimedia, web design and marketing, internet development and electronic trade, systems integration and hosting geared business to business and business to consumer, as well as in internet financing and electronic marketing. Co. serves defense and security, transport and traffic, energy and industry, telecom and media, finance and insurance, and public administration and healthcare markets. Co. operates primarily in Europe, the United States, Canada, and Latin America.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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