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IBERIAN DAILY 29 APRIL + 1Q’22 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BBVA, CAIXABANK, CIE AUTOMOTIVE, FCC, GRIFOLS, MAPFRE, TÉCNICAS REUNIDAS, VISCOFAN.

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 1Q’22 results to be released over the coming days in Spain.

Markets maintain gains
The rally in the European stock markets withstood the strong tightening of debt curves and the poor 1Q’22 GDP data in the US and Amazon’s disappointing results. Thus, the Euro STOXX closed with gains, with Energy (new oil price increases) and Technology (amid expectations of regulatory easing in China) standing out, whereas Basic Resources and Real Estate saw the bigger losses. As for macro data, in Spain, poor unemployment and the 1Q’22 social security affiliation data and April’s preliminary inflation slowed significantly (lower energy costs). In Germany, April’s inflation increased unexpectedly to 7.4%,. In the Euro zone, the ECB’s meeting minutes showed the dependence of the monetary policy on macro data. In the US, the first reading of the 1Q’22 GDP (-1.4% q/qa). Separately, Russia threatened with retaliations to the attacks in Russian territory. In US business results, Twitter, Mastercard Intel and Apple did better, McDonald’s online and Domino’s Pizza disappointed.
What we expect for today
The European stock markets would open with gains. Currently, S&P futures are up +0.3% (yesterday the S&P 500 ended +1.7% higher vs. the European closing bell). Volatility in the US decreased (VIX 29.99). Asian markets are climbing (China’s CSI 300 +2.27%, and Japan’s Nikkei +1.75%).
Today we will learn in Spain the 1Q’22 GDP (preliminary), February’s current account balance, February’s industrial output and March’s retail sales, in Germany the 1Q’22 GDP (preliminary), in Europe March’s M3 supply, April’s preliminary inflation and the 1Q’22 GDP (preliminary), and in the US March’s personal income and outlays. In US business results, Exxon Mobil, Chevron, Colgate-Palmolive, Philips 66 and AbbVie, among others, will release their earnings. In debt auctions: Italy (€ 8 Bn in bonds due 2027, floating rate notes due 2030 and 2032).

COMPANY NEWS

1Q’22 Results previews.
Of the stocks releasing their earnings over the coming days, on the positive side we highlight IAG (06 May), where we expect the confirmation of the outlook for the summer’22 and the lack of need for a capital increase to be a catalyst for the stock following its lacklustre performance thus far this year (-0.6% and +1% vs. Ibex).

CAIXABANK. 1Q’22 Results. Gross margins fuelled by trading revenues, costs in line, very good CoR and FL CET1. BUY.
The 1Q’22 results showed a less significant drop in NII than expected (-0.6% vs. 1Q’21 and -1.2% consensus), with stabilisation of the customer spread. The biggest snag comes in fee revenues (loyalty), which grew by +3% vs. 1Q’21 and vs. 4.1% consensus. Thus, trading revenues boosted the Gross margin (+8.3% vs. 1Q’21 and +6.2% expected). Costs came in fully in line with expectations. Very good performance in loan quality, with a 25bps CoR, in line with the guidance. Net Profit increased by +21.9% vs. 1Q’21 PF and vs. marginal increase expected. Very good FL CET1 ratio (+20bps vs. 4Q’21 to 13.4%). The company reiterates payout of between 50% and 60% and potential buybacks. We expect a neutral share price reaction with a positive slant. Conference Call at 11:30 (CET).

CHANGES IN OUR SPANISH MODEL PORTFOLIO.
We add Repsol to our 5-Stock HY portfolio after its earnings release. We believe that the company will end up raising its dividend policy, already offering a 7.9% yield in 2022 (DPS in cash + share buyback) and it could be raised up to >9% yield. In terms of estimates and after the 1Q’22 we believe there is a possibility to raise refining margins’22e to 1Q’22 levels, meaning an increase of ~+5% in our T.P. (€ 14.30/sh.). We exclude Mapfre from our portfolio, as following the results made public yesterday, with a negative performance in the motor segment, we see risks of estimate cuts by around -10%/-15% and the share price will remain under pressure in the short-term. The company should need earnings delivery again to restore the market confidence.

BBVA, SELL.
The company obtained € 1.16 Bn of Net Profit in 1Q’22 (+36% vs. 1Q’21), ~+33% above expectations, with a better performance in all business lines. In revenues, NII grew +21% vs. 1Q’21 (+6% vs. consensus); fee revenues +9.5% (~+5% vs. expected). Costs climbed by +5% vs. 1Q’21 (vs. ~+6% expected), meaning a +24% increase in Operating Income (~20% above expectations). Provisions also came in better than expected (CoR of 82bps vs. ~95bps expected and guidance’22 of ~100bps), with a stable NPL ratio. As for capital, the CET1 ratio came in at 12.70% (-5bps vs. 4Q’21), in line with expectations.
In principle, the results showed a very robust performance, and thus, we expect a positive share price reaction.

MAPFRE, BUY.
Highlights from the Conference Call on 1Q’22 Results held at yesterday’s closing bell:
Outlook in the motor segment: The deterioration in the motor segment in Spain, Brazil and North America is due to several factors: still normalised 7-8% discount in policies during the pandemic, competition (particularly in the US), rop in average premium due to lower vehicle sales and reduction of coverages, higher-than-expected inflation, increase in claims frequency and increase in thefts in Brazil. MAP is raising tariffs (by double-digit levels in Brazil and around +6% in the US), controlling claims and the cost of repairers, reducing cost. The CR peak in Spain (99.7% in 1Q’21) was hit in February and it has been improving since that date. The company expects it to continue normalising in all markets although no specific guidance for 2022 was given.
Health: Claims in the 1Q’22 were higher than usual given the update of consultations/treatments postponed due to Covid-19 and should be gradually reduced. With this in mind, part of the increase in claims is rather structural (increase in diagnostic tests), for which the company has raised tariffs in Spain and it will do so shortly in LatAm.
Investments: The exposure to the Ukrainian-Russian conflict has been fully cleaned up (around € -10 M impact on results) and there is no risk of higher impairments in results.
The company plans to hold an ID to unveil the Strategic Plan (confirmed) on 13/06.
The strong deterioration seen in the motor segment was unexpected and highly linked to the current environment (inflation, supply chain shortage, energy, etc.), and we believe it will continue over the coming quarters bearing in mind, among other factors, that the improvement in profitability from price rises takes time to surface. With this in mind, we believe that the actions initiated by MAP should bring back the profitability of the segment to its normal levels (96-97%) in 2023-24e. We see risk of estimate cuts’22 by the market consensus of around -10% (€ 715 M currently), and we will revise our Net Profit estimate’22 by around -15% (€ 761 M currently) with an impact of around -5%/-10% on T.P., yielding >10% upside, and thus we maintain our BUY recommendation although we believe that the share price will remain under pressure in the short-term. Following yesterday’s correction (-6.5%), the share price has fallen -4.5% YtD (-1% vs. Ibex and -2% vs. sector).

VISCOFAN, BUY.
The 1Q’22 results came in below expectations in EBITDA (+0.3% vs. +2.4% BS(e) and -1.4% consensus) due to worse margins (22% reported vs. 23.7% BS(e) and 22.5% consensus), bringing the profitability loss to -320bps (22% reported vs. 25.2% in 1Q’21). On the organic level, EBITDA decreased by -8% vs. 1Q’21. Albeit unsurprising, this would be due to the higher energy costs, raw materials, transportation, emission rights, etc. In this regard VIS announced a new price increase that will come into force mainly in the 2H’22. As for sales, they increased by +15% vs. 1Q’21. Debt rose slightly to € 14 M vs. e 2 M as of YE2021, due mainly to the higher investments needed to carry out its strategic plan (€ 12 M in 1Q’22 vs. e 8 M in 1Q’21). There will be no conference call.
In short, poor results that came in below expectations. We expect a lacklustre/negative reception of these results, despite the stock’s poor performance YTD (-5% in absolute terms and -4% vs. Ibex). Since we changed our recommendation to BUY on 21 Feb, the stock has underperformed the Ibex by -5%. However, we believe that against the current backdrop of volatility VIS is an interesting option, as we see a lower risk thanks to: (i) the counter-cyclical nature of demand in its business (Covid-19 or geopolitical tensions hardly had any impact), (ii) its leading position within an oligopoly, with some pricing power, (iii) its comfortable financial position (~0.1x NFD/EBITDA) and (vi) its geographic diversification (North America accounts for 30% of total sales).