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IBERIAN DAILY 19 FEBRUARY + 4Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACS, AENA, BANKINTER, CIE AUTOMOTIVE, COLONIAL, OHL, RESULTS HIGHLIGHTS.

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’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

Sell-off in Europe continues
The poor opening in the US led European stock markets to losses, where the rising debt curves begin to worry investors. In the Euro STOXX, almost all the sectors showed losses, with Autos and Retail the only ones closing in positive numbers, whereas Basic Materials and Banks (leaders of the rally over the past few weeks) ended with the biggest drops. On the macro side, in the euro zone February’s consumer confidence recovered slightly more than expected. Meanwhile, the ECB meeting minutes confirmed that members are committed to maintaining stimulus measures for at least all of 2021. In the US, the poor performance of the labour market at the beginning of the year is worrying, following another disappointing weekly jobless claims figure. However, the Philadelphia Fed index for February fell less than expected. In Japan, February’s preliminary manufacturing PMIs rose slightly to 50.6. As for vaccinations, studies confirm the lower effectiveness (still >50%) against the South African strain, but there are also studies suggesting 85% efficacy for the first dose of Pfizer’s vaccine, which could speed up vaccination plans. In US business results, Omnicom beat expectations, PPL and Walmart were disappointing.
What we expect for today
European markets would open with slight gains, with crude prices falling as the inclement weather in the US fades. Currently, S&P futures are down -0.10% (the S&P 500 closed up +0.45% vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 22.49). Asian markets are mixed (CSI 300 +0.3%, Japan -0.7%).
Today in the euro zone and the UK we will learn February’s preliminary manufacturing and services PMI and in the US January’s second-hand home sales. In US business results, DISH Network, Deere and DTE Energy, among others, will release their earnings.


COMPANY NEWS

CIE AUTOMOTIVE. Close to its fair value. SELL.
The resilience shown by the company in 2020 has been evidenced with its share price performance, which has soared +128% since March’20 lows (+101% vs. IBEX) vs. +91% on average for its peers. The stock is trading at 8.5x EV/EBITDA’22e and 10.6x P/E’22e, at a premium of +44% and +17% vs. its historical ratios. As we do not foresee any surprises in the 4Q Results, we have revised our long-term estimates (+4.5% in EBITDA’25e vs. previous level), with some additional adjustments to the model (lower CAPEX and rollover). With this in mind, our T.P. rises by +17% up to € 24.57/sh., yielding at current levels limited upside of around +5%, and thus, we cut our recommendation to SELL.

OHL. Expecting delivery on the cash level. SELL.
After a positive operating performance in 2020, we raise our EBITDA and Net Profit’20/23 estimates by +39% and +78%, respectively, on average, but we increase working capital needs by +15% going forward, and thus, we set a new T.P. of € 0.60/sh. (vs. Under Revision; -7.7% upside). Although we cannot rule out a positive share price reaction following these 4Q’20 results (we expect € 22 M of EBITDA and € 109 M of NFD vs. the company’s guidance of € 15 M and € 131 M, respectively), we do not see an appealing yield/risk profile from current levels, and thus, we reiterate our SELL recommendation. We would take a more positive stance if the current risks on Legacy projects disappeared and the company generated positive FCF (starting in 2023 BS(e)) that allowed it to comfortably meet the maturity of its bond issuances over the 2025-26 period.

ACCIONA, SELL.
Although the FY2020 results were in line with expectations in EBITDA (+3.9% vs. BS(e) and +3.4% vs. the consensus) and better in NFD (€-350 M vs. adjusted BS(e) and €-550 M vs. the consensus), the main highlight from the presentation were the implications of the IPO of its Renewables division, which would increase the company’s target of ~15 GW installed by YE 2024 to ~20 GW in 2025 (around +100% in capacity as of YE2020).
Although we would still need to know relevant details (structure and percentage of the placement; the press mentions a minimum placement of a 25%), even assuming 100% of the capacity that would be installed through 2025, our T.P. would not exceed € 137.00/sh. (vs. yesterday’s closing price of € 138.60/sh.; 11x EV/EBITDA’21e Energy vs. sector closer to 15x/18x). The additional project pipeline (5 GW) would add between € 525 M and € 1.05 Bn equity to our valuation, depending on the probability of success (50%-100%; Renewables €~9.5 Bn EV) and valuing the additional MW at 1.2x the invested CAPEX, which means between +8% and +16% vs. yesterday’s +11% rise. We maintain SELL and place our T.P. Under Revision.

4Q’20 Results highlights and rest of previews.
Among the companies releasing their earnings next week, on the positive side, we stress Grifols (release date 26/02), where we expect a negative impact due to a lower plasma supply (starting in 2Q’20) and the exchange rate (-6pp in sales), but better performance in EBITDA margins (26.5% BS(e), +50bps vs. consensus), which, in addition to the stock’s recent performance (-5% vs. Ibex thus far this year), might lead to a positive share price reaction.