EUR 100.00 For Business Accounts Only

IBERIAN DAILY 11 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ARCELOR, CAF, CHANGES IBEX, INDITEX, REPSOL, SANTANDER, TALGO, VIDRALA.


MARKETS YESTERDAY AND TODAY

ECB in line with expectations
Stock markets closed practically flat, and although they initially reacted negatively during Lagarde’s appearance, they subsequently recovered. With all this in mind and while volatility rises, in the Euro STOXX the best-performing sectors were Energy and Consumer Goods, whereas Banks (-2.4% after the ECB increased stimuli) and Travel & Leisure were the worst relative performers. On the macro side, in the euro zone the ECB meeting brought no surprises, with the PEPP being increased in both amount (€ +500 Bn) and duration (through March’22). Along with this, new liquidity measures were pushed for the banking sector and economic recovery forecasts were worsened (with the EU GDP standing at 3.9% in 2021 and 4.2% in 2022). Separately, Hungary and Poland withdrew their veto in exchange for minor concessions. The EU budget was, therefore, approved and the funds are expected to come by mid 2021. Moreover, the EC launched its emergency plan in case Brexit talks break down, a series of measures aimed at avoiding an interruption in air and road transport. In the US, general and core inflation for November came in above expectations, but the low oil prices and recovery in consumption suggest they will remain at low levels. Weekly jobless claims rose more than expected.
What we expect for today
We do not expect great joy following the approval of the EU budget, widely priced in by the market and Banks will remain under pressure by the ECB measures. Currently, S&P futures are down -0.11% (the S&P 500 closed practically unchanged vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 22.52). Asian markets are sliding (CSI 300 -1.7%, Japan -0.4%).
Today in Spain we will learn November’s final inflation and in the US November’s production prices and December’s U. of Michigan consumer confidence. As for ratings, Fitch will revise Spain (A- stable).


COMPANY NEWS

INDITEX. 3Q’20 Results estimates. SELL.
The company will release its 3Q’20 results on 15 December, which we expect to be poor due to the effect from Covid-19 and the restrictions on store openings in some countries, although better than in 1H’20. 3Q’20 sales on a standalone basis total € 6.08 Bn (-13%); EBIT € 1.18 Bn (-21%); Net Profit € 875 M (-25%). Although visibility is low due to the exceptional situation, we think the stock is already pricing in a scenario of recovery, and thus we see no upside at the current share price, unless there is a positive surprise in the results.

VIDRALA. We see the bottle half full. BUY.
We initiate coverage on VID with a BUY recommendation and T.P. of € 108.60/sh. (+21% upside). Although the stock’s total return has been +422% over the past decade (with a CAGR of +11% in EPS), we think it still has an appealing growth story at a reasonable price thanks to the current interest rate levels and the bright outlook for the industry, which is much more disciplined today than it was 10 years ago. We expect a CAGR’20-25e of +2.3% in sales and +5.4% in EPS thanks to improved efficiencies stemming from higher utilisation levels. The stock is trading at 10.7x EV/EBITDA’20e, with a premium vs. its sector (9.4x) and historical average (8.3x) that we feel is justified by its higher margin, thanks to interest rates and a +4pp improvement to ROCE vs. its historical average.

ACCIONA. Accelerated placement of 3.85% of share capital and private sale of 1.75%. SELL.
The company announced at yesterday’s closing bell that La Verdosa (held by a branch of the founding family) has launched an accelerated placement of 3.85% of ANA’s share capital, and sold privately (to other shareholders from the founding family) an additional 1.75% (keeping a 0.18% stake) at a price of € 96.42/sh. (-15% vs. yesterday’s closing price). None of the two majority shareholders has communicated variations in their respective stakes for the time being, and thus, we understand that they have not exceeded any thresholds that require them to communicate it. The sale of a substantial stake by a reference shareholder is not good news. However, we would have to know the discount at which the placement is made before assessing its market impact precisely. The share price has outperformed the IBEX by +15% since February’s pre Covid-19 highs.

CHANGES TO MEDIUM & SMALL INDICES
Prosegur Cash, Dominion, Liberbank and Rovi are added to the IBEX Medium index, while FCC, Talgo, Técnicas Reunidas and Vidrala are removed. Fluidra will have a market cap weighting of 60% (vs. 40% previously). Talgo and Técnicas Reunidas, among others, will be included in the Ibex Small index, and Unicaja will have a market cap weighting of 40% (vs. 60% previously). Changes will be effective on 21/12 (close 18/12).

CAF/TALGO. BUY/BUY.
According to the press, CAF and TLGO would have dropped from Renfe’s tender for the supply of 211 commuter trains (valued at €~2.7 Bn). According to the news story, only Alstom and Stadler have been shortlisted. This news is not based on an official communiqué from either of the aforementioned manufacturers, although the news article refers to the Public Procurement Review Central Administrative Court.
Although the press echoed some information in this regard, if confirmed, this would be bad news for CAF and TALGO, given that even the smaller of the lots had a significant size for both (11% and 28% of the backlog, respectively). For CAF, although this is a relevant contract, its loss is business as usual. In the case of TLGO, although the probability of winning a lot was lower, if the company had won it, aside from its significant economic impact, this would have meant an important milestone in the launch of its new commuter segment. However, our valuation of the company did not include this contract specifically, but €~1 Bn of order intake between 2020 and 2021, of which € 460 M would have already been awarded. From February’s pre Covid-19 highs, the company has fallen by -27% (-13% vs. IBEX).