IBERIAN DAILY 26 JULY + 2Q’23 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACCIONA, ACS, ENAGÁS, FCC, IBERDROLA, METROVACESA, REDEIA, SACYR, SANTANDER, TALGO.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 2Q’23 results to be released over the coming days in Spain.
All eyes on results and the Fed
European stock markets hardly reacted to China’s rally and closed with slight gains, pending the rather mixed results and the Fed meeting today. In the Euro STOXX, Basic Materials and Consumer Goods led the gains, with Retail and Travel & Leisure (leading the drops for the second straight day) posting the biggest losses. On the macro side, in Germany June’s IFO fell more than expected for the third straight month, with the weakness of the manufacturing sector standing out. In Spain, the IMF raised its 2023 GDP forecast to 2.5% (+1.0bps vs. previous level), keeping its 2024 estimate at 2.0% thanks to the robustness of the services and tourism sectors. In the euro zone it foresees 0.9% in 2023 (+0.1pp) and 1.5% in 2024 (+0.1pp), whereas in the US it expects 1.8% (+0.2pp), cutting its 2024 forecast slightly to 1.0% (-0.1pp). Lastly, it recommended the BoJ to abandon the curve control policy and to prepare for further monetary tightening. In the US, July’s Conference Board consumer confidence rose more than expected, due to both the present situation and expectations components. In Brazil, June’s inflation fell more than expected to 3.19% YoY. In Mexico, May’s IGAE economic activity index rose more than expected. In US business results, Invesco came in below expectations, Moody’s, Microsoft and General Motors was in line, Alphabet, General Electric and Visa above expectations.
What we expect for today
European stock markets would see a bearish opening, awaiting the decisions to be made at the Fed meeting. Currently, S&P futures are flat (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US fell (VIX 13.42). Asian stock markets are falling (China’s CSI 300 -0.50%, Japan’s Nikkei -0.10%).
Today in the US the Fed will meet and we will learn July’s new home sales. In US 2Q’23 Results, Meta, Ebay, Coca Cola, Hilton and Boeing, among others, will release their earnings. In debt auctions: Germany (€ 4 Bn in bonds due 2030).
COMPANY NEWS
ENAGAS. 1H’23 results in line. Includes capital gains from sale of Morelos. BUY.
The 1H’23 results were in line with our expectations and those of the consensus in EBITDA (€ 372 M vs. € 368 M BS(e) and consensus), whereas reported Net Profit came in at € 176.8 M (vs. € 172 M BS(e) and € 168 M consensus), benefiting from the sale of 50% of the Morelos gas pipeline (€ 42 M) and the strong performance from investees. Without including the TGE accounting adjustment from 1H’22 (€ -133 M) or the capital gains from Morelos, the change in Net Profit would be -17.9%. These results will allow ENAG to reach its guidance of €~770 M of EBITDA in 2023 (in line with the consensus and BS(e)) and €~310-320 M of Net Profit. We would not expect an impact from these results. Conference call at 8:30 (CET).
SANTANDER. 2Q’23 results beating expectations. BUY
The company has obtained € 2.67 Bn of Net Profit (+13.6% vs. 2Q’22), around +4% above the consensus (+7% vs. BS(e)), thanks to better revenues (+12% vs. 2Q’22; +3% vs. consensus and BS(e)), lower provisions (CoR ~110bps vs. 120bps expected) and a lower tax rate. In net margin, the better revenue performance is underpinned by NII (+12.4% vs. 2Q’22) and slightly higher trading revenues, although there is more pressure on costs (+7.4% vs. 2Q’22; +1.5% vs. estimates). By regions, better performance in Europe (Spain, UK thanks to revenues), Mexico and DCB (due to lower CoR), offset by Brazil (no improvement in CoR and with Net Profit hit by the reversal of a tax one-off). CET1 reached 12.2%, flat vs. 1Q’23. We expect a neutral/negative reaction from the share price.
REDEIA, SELL
The 1H’23 results are in line with expectations. 1H’23 EBITDA came in at € 789 M (+0.6% vs. 1H’22, vs. +0.4% BS(e) and -2% consensus), whereas Net Profit reached € 354 M (-2.5% vs. 1H’22, vs. +2% BS(e) and +0.3% consensus). By divisions, EBITDA in the domestic TSO business rose +0.6% vs. 1H’22, international +15% and Telecoms fell around -8%. These results would be in line to meet the 2023 guidance: EBITDA above € 1.5 Bn and Net Profit in line with 2022 (€~665 M), and with BS(e) and consensus. NFD fell from € 4.63 Bn in 1Q’23 to € 4.31 Bn in 1H’23, and CAPEX rose substantially to € 413 M, in line to meet the annual target of €~800-900 M.
We do not expect any impact from these results. In 2023 RED has fallen -6.6% (+15.5% IBEX and +4.0% Enagás), and we reiterate our SELL recommendation due to the lack of short-term drivers and falling revenue generation. Conference call at 11:30 (CET).
METROVACESA, BUY
Weak results in deliveries due to a calendar effect and good in pre-sales. Sales: € 165.1 M (-33.0% vs. -29.1% BS(e)); EBITDA: € 9.7 M (-58.2% vs. -56.8% BS(e)). The low number of deliveries (572 units vs. 1,500-2,000 guidance’23) does not allow the company to cover costs with also € 35 M of asset valuation impairment. Net Profit totalled € -25 M (€ -23 M BS(e)).
On the positive side, the pre-sales performance is positive: 483 units (vs. 361 units in 2Q’22 alone vs. 331 units in 1Q’23) with an absorption rate slightly above the average seen in the past 3 years. The company reiterates its FY’23 targets.
These results do not change our view on the company.
Acciona is the parent company of a construction group. Co. is engaged in general construction activities in the areas of civil engineering and buildings, including railways, marine and hydraulic works, motorways and airports, town planning, conduits, pavements, parking lots, and industrial and urban buildings. In addition, Co. is engaged in the provision of real estate services, the operation of parking lots, telecommunications, services, ecology and alternative means of energy. Co.'s operations are organized in six business divisions: Infrastructures, Real Estate, Energy, Water, Environmental & Urban Services and Logistic & Transport Services.
ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
Enagas is a gas transportation company based in Spain. Co. is engaged in the technical distribution and storage of gas through pipelines as well as the provision of regasification services. Co. and subsidiaries are engaged in the ownership, administration, storage, pipeline transportation, distribution flow, and sale of natural gas. As a transport company, Co. also provides gas and manages the gas infrastructures.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
Metrovacesa SA, formerly Metrovacesa Suelo y Promocion SA, is a Spain-based real estate developer. The Company specializes in construction and sale of sustainable housing, both single-family and multi-family residential properties. Its activities also include promotion, urbanization and parceling of real estate in general, as well as real estate management for own benefit or on behalf of third parties. Its asset portfolio includes more than 6 million square meters of building land across Spain, as well as already developed properties in cities, such as Malaga, Almeria, Cordoba, Barcelona and Madrid, among others.
Sacyr is the parent company of a group engaged in the acquisition, development and construction of urban properties for their subsequent rental or resale. Co. primarily leases and sells office buildings and complexes, housing units, and shopping centers. Co. is also engaged in the operation of urban car parking facilities. Co. offers services related to the real estate industry such as technical assistance in energy savings, inventory management, architectural design, telecommunications management, property maintenance, as well as gardening and landscaping. Co. also provides consulting services in the real estate fund management sector.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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