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IBERIAN DAILY 14 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ANNUAL REPORT, ELECTRICITY SECTOR, MEDIASET ESPAÑA.

The Ibex, the best-performing index despite the drops
The week got off with the same negative pattern as that seen at the end of last week and with new warnings that harmed growth prospects, where a new Covid-19 outbreak in Beijing is threating to close the city again. In Europe, the drop was near -3.0% (in the US -4.0%, with the S&P500 in bearish territory after losing more than 20% since recent highs and reaching levels from Jan’21), and with the Ibex being the best-performing index in the euro zone. Fears on growth and Central Banks continue to be a burden (this week the Fed will study whether to speed up rate hikes, with the first up to 75bps). Thus, in the Euro STOXX, all sectors ended with losses, led by Real Estate and Automobiles vs. the lower drops of Food and Household Goods.
What we expect for today
European stock markets would open with rallies of around +0.5%, recovering part of yesterday’s drops after sovereign yields took a breather. Currently, S&P futures are up +0.9% (the S&P 500 ended down -0.87% vs. the European closing bell). Volatility in the US rose (VIX 34.02). Asian markets are sliding (China’s CSI 300 -1.12% and Japan’s Nikkei -1.64%).
Today in Germany we will learn June’s ZEW, in the UK April’s ILO unemployment rate and in the US May’s production prices. In auctions, Italy will issue € 7.5 Bn in bonds due 2025, 2029, 2049 and 2052 and Germany € 5.5 Bn in bonds due 2024.


COMPANY NEWS

ANNUAL SPANISH MARKET UPDATE
Shortly we will release our report on the Spanish market, in which we review our estimates and T.P. for all the stocks in our coverage universe and we highlight the top picks of our portfolios (model, 5-stock, high yield and Mid&Small cap). Throughout 2022, we have been increasing the cyclical profile of our portfolios to the detriment of the most defensive stocks, given that our macro scenario for the 2H’22 assumes a lower risk of an imminent recession. Of the total stocks within our coverage universe (58 vs. 57 in the last edition of this report in June’21), 86% have a BUY recommendation (vs. 75% previously) and 14% have a SELL recommendation (vs. 25% previously). In this report, we change from BUY to SELL: Acciona, due to a low valuation and because we prefer to play renewables through its subsidiary; Ebro Foods, since we believe that its exposure to inflation will continue to affect its margins; and Solaria, due to the lack of catalysts and low valuation. We change from SELL to BUY: Fluidra, as we believe that the correction (-42% from highs) has been exaggerated, and which we now include in our Mid&Small Portfolio replacing G. Catalana Occidente, and Técnicas Reunidas, where we see a lower financial risk and a better outlook for margins in the long-term. Additionally, we raise our target prices by +5% on average, with the most significant changes being: Arcelor Mittal (+52%), Repsol (+26%), Acciona Energía (+24%), Rovi (+16%), Acerinox (+14%), Bankinter (+14%). On the negative side, we lower the target prices for 14 stocks, with the most significant changes being those of Talgo and Ebro Foods (-12% both). Our Top-Down valuation of the IBEX as of Dec’21 stands at 9,250 points, with an implied P/E as of Dec’22 of 12.9x vs. the 12-month forward rate’s current trading levels of 11.5x and vs. 13.5x average expected for the 2010-2022 period.