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IBERIAN DAILY 16 FEBRUARY + 4Q’22 RESULTS. HIGHLIGHTS AND PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ALMIRALL, ENAGÁS, GRIFOLS, GRUPO CATALANA OCCIDENTE, MAPFRE.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 4Q’22 results to be released over the coming days in Spain.

The Ibex targets the 9,300 points
It was yet another session of gains for the European stock markets, although the strong US consumption data might lead to further rate hikes by the Fed. Within the Euro STOXX, Consumer Goods and Industrial led gains, whereas Real Estate and Banks saw the biggest losses. On the macro side, in the United Kingdom, January’s general and core inflation slowed more than expected, whereas in Spain final inflation was raised unexpectedly to 5.9%. In the US, retail sales climbed more than expected, underpinning greater consumption dynamism in the 1Q’22. Separately, industrial output stagnated in January, whereas the NAHB index climbed above expectations in February. In China, home prices saw the first monthly rise in one year with 36 out of 70 cities reporting price rises. In US business results, Biogen came in better, whereas Kraft Heinz disappointed.
What we expect for today
The European stock markets would open with gains of as much as +0.5%. Currently, S&P futures are up +0.1% (the S&P 500 ended +0.43% higher vs. the European closing bell). Volatility in the US dropped (VIX 18.23). Asian markets are mixed (China’s CSI 300 -0.1% and Japan’s Nikkei +0.7%).
Today we will learn in the Euro zone February’s ECB monthly report, and in the US production prices, building permits and housing starts for January, weekly jobless claims and the Philadelphia Fed index for February. In US business results, Hasbro and Zebra Technologies, among others, will release their earnings. In debt auctions: Spain (€ 6.5 Bn in bonds due 2027, 2029 and 2032).


COMPANY NEWS

ALMIRALL. 4Q’22 results preview and cut to estimates. BUY
We expect the 4Q’22 results (20/02) to be marked by the sale of Motilex in Italy (impact of € +5-10 M on EBITDA BS(e)), which would allow ALM to close 2022 in the middle of its guidance range of “EBITDA between € 190-210 M” (-15% vs. 2021). 2023 should be a year of transition, hit by margins being squeezed and lacking clear drivers, apart from the approval of Lebrikizumab (25% of T.P.) in 4Q’23 BS(e), a product that should boost medium-term growth and the potential of which we do not think is being fully priced in. We roll over our model and cut estimates by -12% in EBITDA’22-24 in order to reflect a more conservative scenario, with an impact of -11% on the T.P., which falls to € 12.00/sh. (+35% upside).

GRIFOLS. BUY.
At yesterday’s closing bell, the company announced the implementation of a € ~400 M savings plan (~9% costs’22 BS(e)), focused, on the one hand, on cost optimisation and plasma operations (foreseeing € 300 M of savings), and on the other hand, on the streamlining of corporate tasks and improved efficiency within the organisation. GRF estimates that the implementation of the plan will have a non-recurring cost of € 140 M (~1.7% market cap) to be accounted in the 1Q’23, including, among other factors, the compensation to lay off around ~2,300 employees (~8.3% personnel BS(e)). The estimated savings of these measures will total € 100 M in 2023, whereas the € 400 M annually will be fully visible starting in 2024.
Pending the execution of the plan and the materialisation of the expected savings, we welcome the objective of achieving a more efficient organisation. Although the timeframe is long, in our view, the measures are going in the right direction (2022 sales will be +10% higher than pre-Covid-19 levels, but EBITDA margins will still be -700bps lower BS(e)) and show a strategic shift since the arrival of the new chairman (Steven F. Mayer), regarding whom there were doubts as to his ability to implement far-reaching changes in the company.

GRUPO C. OCCIDENTE. “Floor” Net Profit’24 of € 550 M, at 7x P/E? BUY
Net Profit’24 would exceed € 550 M (more than +15% vs. 2022 BS(e)), and it could come close even in 2023. The erosion of around € -60 M from 2022 stemming from ceded reinsurance will not apply, and Grupo Mémora will be incorporated (€ 20-25 M of Net Profit’23-24 without synergies), and there are potential cost savings following the restructuring of the Traditional Business (which we do not include out of caution). We raise Net Profit’23-24 by +20%, we roll our model over and raise our T.P. to € 50.60/sh. (+10% vs. previous; +75% upside). If we were to include the synergies from Mémora and the cost savings from the restructuring, the T.P. would stand at € 53/sh. (+5% current; +80% upside). Trading at 0.9x P/BV vs. 1.3x average structural P/BV for ROE of ~12.5%, we see these levels as very attractive.