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IBERIAN DAILY 28 FEBRUARY + 4Q’22 RESULTS. HIGHLIGHTS AND PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACCIONA ENERGÍA, ACS, AENA, CIE AUTOMOTIVE, EBRO FOODS, MELIÁ HOTELS, MERLIN PROPERTIES, SACYR, SANTANDER.

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.

Markets remain optimistic
The European stock markets rose yesterday despite the good US macro data, which continues to show a relatively strong US economy. Thus, the Euro STOXX rose driven by Travel&Leisure and Banks, with Media and Household Goods being the worst relative performers. On the macro side, in the Euro zone, January’s M3 supply slowed more than expected, whereas the economic climate indicator fell unexpectedly in February. In the United Kingdom, the PM announced that he had reached an agreement to amend the original Northern Island Protocol by creating a new “Windsor framework”. In the US, January’s durable goods orders contracted more than expected, although core capital goods orders climbed above expectations. Separately, January’s pending home sales increased significantly more than expected, whereas the Dallas Fed index fell unexpectedly. In Japan, January’s preliminary industrial output slowed down more than expected whereas, on the contrary, retail sales recovered more than expected. In US business results, Pinnacle released disappointing figures, and Viatris came in better than expected.
What we expect for today
European markets would see a slight bullish opening, awaiting the first inflation data in the euro zone. Currently, S&P futures are flat (the S&P 500 ended -0.16% lower vs. the European closing bell). Volatility in the US decreased (VIX 20.95). Asian markets are mixed (China’s CSI 300 -0.12% and Japan’s Nikkei +0.1%).
Today we will learn in Spain and France February’s preliminary inflation, and in the US February’s Richmond manufacturing index. In US business results, Autozone, Advance Auto and First Solar, among others, will release their earnings. As for auctions, Germany will issue € 6 Bn in bonds due 2025.


COMPANY NEWS

ACCIONA, SELL
The FY2022 results beat expectations in EBITDA (+7% vs. BS(e) and +9% consensus) and were slightly better in debt, although highly dependent on Acciona Energía’s results (83% ANA and 80% of ANA’s EBITDA’22), where we have already seen that, despite being good at first glance, they are difficult to read due to the unexpected positive elements in Spain and the poor performance in the international division, along with the delay to installations expected in 2023. Nevertheless, the Infrastructures division (18% of EBITDA’22) presented an EBITDA figure +13% above our estimate.
Despite the fact that the Infrastructures division has been a positive surprise, given the negative slant these results of ANE could receive (ANE has more weight on EBITDA and the valuation), we expect a neutral or slightly negative reaction. So far this year ANA has underperformed the IBEX by -6%. There will be a conference call at 10:00 (CET).

ACCIONA ENERGÍA, BUY
FY2022 Results came in far above expectations in EBITDA (+6% vs. BS(e) and consensus) although excluding an impact we deem extraordinary in Spain (at least we did not assume it), results would be even slightly below expectations and with the international division faring much worse (-16% in EBITDA vs. BS(e)). On another note, although the company keeps its long-term installation targets (20GW in 2025), it lowers the capacity target to be installed in 2023 to 1,800MW (vs. around 2,600MW previously). As for the 2023 guidance, the company expects: (i) between € 1.5 Bn and € 1.6 Bn of EBITDA, depending on the performance of pool prices in Spain (vs. € 1.38 Bn BS(e) and € 1.55 Bn consensus), (ii) between € 1.8 Bn and € 1.9 Bn of CAPEX (~1.6 Bn BS(e)) and (iii) ≤ 2x NFD/EBITDA (vs. 2x BS(e) and consensus).
Apparently good results although with a complicated reading due to unexpected factors in Spain and to the poor performance of the international division, which along with the delay in the installations expected for 2023 could lead to a negative market reaction. In the absence of the company’s possible explanations to be given at the conference call, as the long-term installation targets remain unchanged (only with a delay in the short/medium-term) and the guidance’23 in EBITDA and NFD is reasonable, in our view, we estimate that ANE share price could exceed € 40.00 (>+10% upside), and thus, we maintain our T.P. Under Revision and our BUY recommendation.

ACS. FY2022 Results came in better than expected. BUY.
At yesterday’s closing bell the company released better FY2022 Results in sales (+0.6% vs. BS(e) and +5.6% vs. consensus), EBITDA (+3.3% vs. BS(e) and +1.8% vs. consensus) and operating cash generation (€ 1.535 Bn vs. € 1.167 Bn BS(e)), where the figures were largely known after the release of Hochtief’s results (70% ACS; 68% EBITDA’22). Net cash came in at € 225 M (vs. € 366 M BS(e)). Even though these results were largely known (due to Hochtief), as they were also slightly better than expected in the rest of divisions, including operating cash generation, we would expect a positive market reaction. The share price has slid -8% vs. IBEX YTD. Conference call at 12:00 (CET).

AENA. Worse 4Q'22 results than expected. Dividend of € 4.75/sh. announced. BUY
The FY2022 results were affected by an accounting policy change due to DF7, but with no impact on cash. Excluding this impact, EBITDA would have come in below expectations (€ 792 M vs. € 883 M BS(e) and € 928 M consensus), affected mainly by the energy costs (excluding this item costs are in line with 2019). In 4Q’22 NFD fell by € -148 M to a ratio of 3.05x NFD/EBITDA (vs. 49x in 2021 with re-expressed figures). The company has announced a dividend of € 4.75/sh. (3.3% yield; vs. € 3.96 BS(e) and € 4.20 consensus). We expect a negative reaction (+8% vs. IBEX in 2022).

EBRO FOODS, SELL
The 4Q’22 results beat expectations easily on the EBITDA level (+16.3% vs. -9.8% BS(e) and -1.0% consensus), even beating the company’s own estimate for all of 2022 (between € 315-320 M vs. € 335 M reported). Furthermore, the 4Q’22 EBITDA margin rose +30bps more than expected, although it fell -50bps vs. 4Q’21. Behind this growth would be the better performance than expected in rice and Garofalo, in addition to the quicker implementation of price increases in 4Q’22. NFD’22 grew +50% vs. 2021 due to higher working capital, capex and acquisitions.
We expect a positive reaction to these results, especially bearing in mind the stock’s recent performance (-4% vs. ES50). We will raise our estimates around +3%, with a similar impact on the T.P. In any event, we do not expect the stock to gain traction until the inflation situation is cleared up (2023 will continue to be complicated), which will allow the company to price the value-added strategy into the margin.

MELIÁ. 4Q’22 Results came in better than expected in EBITDA. BUY.
4Q’22 Results came in better than expected in EBITDA vs. consensus (+36.3% vs. +32.2% BS(e) and +8.9% consensus), even if we exclude € 12 M of real estate investment revaluation. These results have been underpinned by the improvement of prices (+22%) and lower occupancy (-12pp) vs. 2019. NFD’22 fell by € 61 M vs. 3Q’22 to € 1.21 Bn and liquidity totalled € 380 M (84% of 2023 and 2024 maturities). In 2023 (limited visibility), current bookings are showing double-digit growth rates vs. the same period in 2019. The MICE and corporate segments show recovery in several regions. We expect a positive market reaction despite the share price performance seen in 2023 (+20% vs. Ibex). Conference call at 9:00 (CET).

MERLIN PROPERTIES, BUY
The company has released a solid set of FY2022 results, with strong growth in LfL rents (+7.3%) thanks to rent indexation and an increased occupancy rate (+60bps to 95.1%). GAV grew +2% LfL, whereas NAV ended at € 15.67/sh. (vs. € 15.67 consensus and € 14.64 BS(e)), with a LfL drop in GAV of -1.5% (the yield rose +44bps, but this is offset by the improved capitalisable rents).
We were expecting a bigger drop in GAV in 2022 (-5%), but we will leave our valuation estimates unchanged, as they include the 2022-24 period, as we understand that what the stock did not fall in 2022 it will fall in 2023 and 2024 (the only thing that changes is the timing of the drop in asset values).

SANTANDER. 2023-25 Strategic Plan. No visibility into 2023 for now.
The company will increase its payout from 40% to 50% (cash + share buybacks-SBB-). RoTE’23-25 of between 15% and 17% (meaning a floor Net Profit of between € 11 Bn and € 12.5 Bn, +20%/25% vs. the current consensus estimates). CET1 >12% over the 2023-25 period (~consensus). CAGR’23-25 in revenues of between 7% and 8% (3.5% consensus). CAGR’23-25 in fee revenues of between 8% and 9% (4% consensus). CAGR’23-25 of 4%-5% in costs (~consensus). Efficiency’25 of 42% (44.5% consensus). CoR of between 1% and 1.1%. Conference call at 9:30 (CET). The company has specified the final dividend’22 (DPS of € 0.0595/sh.; €+921 M of SBB), already known. Without visibility into the short term (2023) for the time being. We will fine-tune our estimates by around +10%.