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IBERIAN DAILY 30 JULY + 2Q’24 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, ACCIONA ENERGÍA, ENAGÁS, IBERDROLA, INDRA, OHLA, UNICAJA.

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

IBEX remains above 11,100 points
The week kicked off with mixed results in European stock markets, despite the fact that more dovish moves are expected in monetary policies from the Fed and BoE this week. In the STOXX 600, the best-performing sectors were defensive ones like Real Estate and Pharma, whereas Autos and Construction ended with the biggest corrections. On the macro side, in the UK, June’s mortgage signings data came in below expectations, while Chancellor of the Exchequer, R. Reeves, announced plans to shore up an excessive £ 22 Bn spending hole. In the euro zone a stimulus and sanction plan is being drawn up in case Trump wins the US presidential election. In Japan, June’s unemployment rate fell unexpectedly to 2.5%. In US business results, McDonald’s released worse earnings than expected, whereas Welltower and ON Semiconductor were in line.
What we expect for today
Stock markets would open stable, although the session will depend on the results to be released. Currently, S&P futures are up +0.08% (the S&P 500 ended down -0.17% vs. the European closing bell). Asian stock markets are falling (China’s CSI 300 -0.90%, Japan’s Nikkei -0.24%).
Today in Spain we will learn the 2Q’24 GDP and July’s inflation, in the euro zone July’s economic climate index and in the US July’s Conference Board consumer confidence, JOLTS job openings and May’s housing prices. In US business results, Microsoft, P&G, Merck&Co, T-Mobile, Starbucks, PayPal and Western Union, among others, will release their earnings.

COMPANY NEWS

ACCIONA. 1H’24 Results above expectations thanks to Infra and Nordex. OVERWEIGHT.
EBITDA grew +7.1% up to € 990 M (vs. -9.6% BS (e) and -5.1% consensus) thanks to the strong contribution from Infra’s business (mainly explained by the strength of construction) and to Nordex’s contribution (largely underpinned by the recovery of a provision with a € 102 M impact), which offset ANE’s sharp drop. As for the new 2024 guidance: (i) the company expects around € 2 Bn of EBITDA (foreseeing € 200/300 M in 2024) vs. the previous target of single-digit growth excluding capital gains (that would be flat now) and vs. € 1.87 Bn BS(e) and € 2.04 Bn consensus. Following the poor YtD performance (-8% in absolute terms and -22% vs. IBEX), we expect a positive market impact. Furthermore, ANE’s 2H’24 prospects are better and asset rotation has already started.

ACCIONA ENERGÍA, OVERWEIGHT
The results were weak, and basically in line with expectations, showing a backdrop of low production and low prices. Sales fell -24% to € 1.33 Bn (vs. -26.5% BS(e) and -21.3% consensus), with consolidated production of 11,945 GWh (+14% vs. 1H’23 and vs. 12.0 GWh BS(e)) and an average price of € 62.70/MWh (-27% vs. 1H’23). Installed capacity rose by 444 MW (with the target of 1.7 GW in 2024 maintained, and with acceleration expected in 2H’24). 1H’24 EBITDA came in at € 419 M (-39% vs. 1H’23 vs. € 421 M BS(e) and € 434 M consensus) as a result of the weakness mentioned above. 1H’24 NFD totaled € 4.61 Bn (vs. € 3.73 Bn in 2023 and vs. € 4.65 Bn BS(e)) due to the intense CAPEX use (€ 847 M net in 1H’24 vs. € 1.54 Bn in 1H’23) from the aggressive new installation schedule.
The company has released a new guidance’24, lowering it vs. what was announced in the FY2023 results, and which appeared in the 1Q’24 trading statement (although without specifying at that time): (i) €~1 Bn of EBITDA excl. capital gains (€ 200-300 M of capital gains expected vs. €~300 M previously) vs. € 1.1 Bn previously and vs. € 1.02 Bn BS(e) and € 250 M of capital gains and € 1.20 Bn Bloomberg consensus; (ii) CAPEX (pre-asset rotation) of € 1.8-1.9 Bn; and (iii) production of 25.5 TWh (11.5 TWh in Spain and 14 TWh international) vs. 25 TWh BS(e) and prices of €~65/GWh (vs. € 62.4 BS(e)).
The company has also announced a hydro portfolio in Spain (23 plants, with an average of 23 years remaining on their concessions, and a total of 175 MW) for 287 M, expected to be finalised this year. This sale would mean some € 170 M of capital gains.
The results are weak, as expected, due to the lower production and a backdrop of low prices, but this translates into a reduction to the guidance that is now in line with our estimates and those of the consensus (after the profit warning from the 1Q’24 trading statement). Following the stock’s poor performance (-31% in absolute terms and -45% vs. IBEX in 2024), and bearing in mind the announcement of the first asset sales (€ 287 M, 4.4% of NFD and with € 170 M of capital gains) which to some extent alleviates part of the leverage tension, and given that 2H’24 is expected to be better (much better price situation: futures would be at €~80/MWh in Spain, almost double in 1Q’24, and for 2025 € 73.50), the results could be well received.

INDRA, OVERWEIGHT
The order backlog grew +4.8% up to € 7.15 Bn (fuelled by Minsait and ATM), accounting for 1.54x sales with 1H’24 net order intake totalling € 2.68 Bn (+7%, and +2% in 2Q’24). 2Q’24 sales rose +8.3% (+9.1% in local currency), growing in all divisions: Defence +17%, Mobility +9%, ATM +8% and Minsait +6%). 2Q’24 EBIT came in at € 89 M (+20.8%) with a 7.5% margin (vs. 6.7% in 2Q’24), leaving 1H’24 EBIT at € 179 M (+29.1% vs. 1H’23), with a 7.8% margin (vs. 6.9% in 1H’23). 1H’24FCF totalled € 69 M (vs. € 54 M in 1H’23) with € 1 M in 2Q’24 FCF (including the 41 M payment of income tax from the delivery of shares of the medium-term remuneration plan). 1H’2 NFD came in at € 93 M (vs. € 107 M in 2023), meaning a 0.2x NFD/EBITDA ratio of 0.2x.
The company raised its 2024 guidance: (i) revenues in local currency > € 4.8 Bn (vs. € 4.65 Bn previously and vs. € 4.79 Bn of sales BS(e) and € 4.72 Bn consensus), (ii) EBIT > € 415 M (vs. > € 400 M previously and vs. € 406 M BS(e) and € 410 M consensus) and (iii) FCF > € 260 M vs. > € 250 M previously and 266 M BS(e)).
We expect a positive market reaction thanks to the robust results, where the good growth trend continues, which also led the company to raised its 2024 guidance slightly. The share price has been a lacklustre performance in the past month (+1% in absolute terms and -1.6% vs. IBEX).

OHLA, OVERWEIGHT
The 2Q’24 results showed operating performance above expectations (€ 38 M of EBITDA vs. € 32 M BS(e); +23% vs. 2Q’23), where we especially highlight Construction (~89% sales) due to the better margin performance (+150bps vs. 1Q’24 to 4.9% vs. 4.5% BS(e)). Solid performance as well on the cash level, with € +40 M of cash generation on the quarter (vs. € +0 M BS(e)) to a net cash position of € 145 M, thanks to better working capital performance. On the outlook level, the company maintains its EBITDA guidance’24 of at least € 130 M (vs. € 129 M BS(e) and € 132 M consensus).
The 2Q’24 results are solid and better than expected, which we think should be well received, although they could fall into the background, bearing in mind the imminent bond refinancing process (€~430 M, 84% of debt). Note that the deal will include a capital increase of at least € 100 M (~52% market cap). The stock has fallen -28% in 2024 (-38% vs. IBEX).

UNICAJA, UNDERWEIGHT
The 2Q’24 results were very much in line with expectations in all headings. We only highlight that they were slightly below in taxes (-7% vs. expected) and other provisions (€ 8 M below), which offset higher legal provisions than expected (€ 43 M vs. € 19 M). Unadjusted ROTE came in at 6.5% (vs. 5.4% in 1Q’24) and UNI has raised its adjusted ROTE’24 target (at 12.5% CET1) from 9% to >10% (vs. 8% in 2Q’24), which according to our estimate means Net Profit’24 of €~590 M (+2% vs. BS(e) and +6% vs. consensus).
CoR stands at 23bps in 2Q’24 vs. 25bps YoY in 1Q’24. The NPL ratio fell slightly to 2.9% (vs. 3% in 1Q’24), with the coverage ratio stable at 66%. UNI has released a CET1 figure of 15.1% vs. 14.5% in 1Q’24, benefiting from the positive performance of RWAs and others (+30bps).
We expect a positive, but limited reaction to the higher ROTE target. Following these results with no surprises at all, we think that at the current share price the stock is unappealing in terms of upside potential after rising +19% in the past three months (+3% sector) along with the consensus having raised its estimates +11%/+8%/+5% in Net Profit in 2024/25/26.
Although UNI is trading at multiples that could appear attractive in absolute terms (0.6x P/TE’24 and 6.5x P/E), it is also true that ROTE’24 (unadjusted) is around 8.6%-9.3% BS(e) for a Ke at a low vs. peers: 11.6% vs. 13.9% sector. There will be a conference call at 9:00 (CET).