EUR 100.00 For Business Accounts Only

IBERIAN DAILY 07 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACCIONA ENERGÍA, APPLUS, CAF, ELECTRICITY SECTOR, MEDIASET ESPAÑA, RESIDENTIAL PROPERTY DEVELOPERS.

MARKETS YESTERDAY AND TODAY

Ups and downs
Fears stemming from rising debt yields once again dragged down European stock markets, although the release of solid private employment data in the US softened the drops. In the Euro STOXX, all the sectors fell, led by Autos and Telecoms, whereas Food and Utilities were the best relative performers. On the macro side, in Germany August’s factory orders fell much more than expected. In Spain, August’s industrial output fell unexpectedly. In the euro zone, August’s retail sales rallied, but less than expected, and the IMF expects inflation to reach its ceiling in the autumn due to the rising raw material prices and the problems with supply chains, then falling throughout 2022. In this regard, the industry (mainly chemical and steel) warned that the increase in energy prices threatens the recovery of the economy, forcing to implement temporary suspensions, which would aggravate price and supply problems to a greater extent. The Russian government would be willing to increase gas shipments to the EU to tackle the price hike. In the US, September’s ADP private employment survey showed close to 568,000 jobs created (far above the consensus estimate). On another note, the Republicans opened the door to raise the debt ceiling through Dec’21.
What we expect for today
European stock markets would open with gains of more than +1.0%, led by growth, although volatility will continue. Currently, S&P futures are up +0.4% (the S&P 500 ended +1.12% above its price at the closing bell in Europe). Volatility in the US dropped (VIX 21.00). Asian markets are rising (China’s CSI closed and Japan’s Nikkei +0.8%).
Today, in Germany we will learn August’s industrial output, in Mexico September’s inflation, in the euro zone ECB meeting minutes and in the US weekly jobless claims. In debt auctions: Spain (€ 5.0 Bn in bonds due 2028, 2031, 2033 and 2048) and France (€ 11 Bn in bonds due 2030, 2031, 2053 and 2066).

COMPANY NEWS

ACCIONA/ACCIONA ENERGÍA. Two ways to play renewables. BUY/BUY.
The recent IPO of 17% of ANE by ANA (its parent company with 83% of the capital after the IPO) provided its subsidiary with a financial structure (2.4x NFD/EBITDA’21e) that (i) will allow it to finance its growth targets (20GW operating in 2025 and >30GW in 2030 vs. 10.7GW in 2020) while (ii) reducing the cost of capital and therefore maximize the value of the group’s renewable business (75% of ANA’s EBITDA’21e and 81% of EV). We initiate coverage of ANE with a € 33.50/sh. T.P. (+25% upside) and BUY recommendation. The implicit multiples of our T.P. are 11.5x and 23.6x EV/EBITDA’23e and P/E’23e vs. 13.5x and 34.0x for the sector and 12.2x and 30.9x for its main peer EDPR. Based on our estimates and valuation of ANE, we resume coverage of ANA with a € 180.90/sh. T.P. (+30% upside) and BUY recommendation. ANA would currently be trading at a slight discount vs. ANE (-5%).

ELECTRICITY SECTOR
According to the press, the Ministry for Ecological Transition is considering suspending or modifying the RD on gas (still pending approval in Congress) in view of the sharp increase in gas prices since the RD came into effect, given that the revenue reduction on hydro, nuclear and some renewable energies due to windfall profits in gas would skyrocket, collecting much more than the € 2.6 Bn forecast. For gas prices above € 100/MWh this would mean doubling the cut to revenues initially forecast. Specifically, the vice President for Ecological Transition, Teresa Ribera, has called a round of meetings with heads of Iberdrola, Endesa and Naturgy to discuss the matter and look for solutions. Yesterday the companies prepared their proposals.
Very positive news for the sector since, as we have stated on other occasions, the key to a rebound is for talks between the sector and the Govt. to begin. This is key to dispelling the regulatory uncertainty currently penalising the sector. In any event, even if a change to the regulation is made, the Government’s target is for the companies to contribute to the solution. The options could be to delay the regulation or modulate it, but we do not rule out the possibility of a larger agreement being reached. Ribera had shown her willingness to revoke the measures if an effective agreement was reached with the EU to face the crisis. Apart from fiscal and social measures, the need to reform the pricing system (due to the impact from gas) and the joint gas purchase proposal would be under review.
Since the RD 17/2021 for Gas was put into place, the main utilities and renewable energy companies have accumulated a significant drop: Endesa (-13.8%), Iberdrola (-14.2%), Naturgy (-0.7%), Acciona (-4.9%) and Solaria (-9.3%) (vs. IBEX -0.4%). These drops are much bigger than the one-off that would come from the initially announced measure on market cap (-4% for Endesa, -1.7% Iberdrola,