EUR 100.00 For Business Accounts Only

IBERIAN DAILY 08 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, ELECTRICITY SECTOR, PROSEGUR CASH, REPSOL, SACYR.

MARKETS YESTERDAY AND TODAY

Russia calms the market
The European market rallied sharply, led by growth in the euro zone, and with less pressure on gas/crude oil prices and the possible extension of the debt ceiling through Dec’21 by US$ 480 Bn. In the Euro STOXX, all the sectors ended with gains, led by Autos and Basic Materials, whereas Energy and Media rose the least. On the macro side, in Germany August’s industrial output contracted less than expected. In the euro zone the ECB’s meeting minutes were quite positive, with the members expecting the improved activity levels and inflation to allow for purchases within the PEPP to be reduced. However, the members were more worried about the market’s reaction, and thus the forward guidance will continue to be highly accommodative. In Spain, yesterday the Cabinet approved the 2022 budgets, estimating 7.0% GDP growth, a -5.0% deficit and debt reaching 115% of GDP, where 60% will go towards social spending and investments will reach € 40 Bn. In the US, weekly jobless claims fell more than expected. As for energy, China ordered coal mines to significantly increase production urgently in order to avoid an energy crisis, whereas Bloomberg warns on the low diesel and coal stockpile levels in the US, which would pressure utilities in the winter.
What we expect for today
European stock markets would open with slight losses in a session expected to be volatile in view of the new rise in oil prices and interest rates, and awaiting US employment data. Currently, S&P futures are flat (the S&P 500 ended -0.63% below its price at the closing bell in Europe). Volatility in the US dropped (VIX 19.54). Asian markets are rising (China’s CSI +1.2% and Japan’s Nikkei +1.6%).
Today, in the US we will learn September’s job creation and unemployment rate.

COMPANY NEWS

REPSOL. With the Trading statement we expect solid 3Q’21 results. BUY
The 3Q’21 trading statement brought no surprises in crude prices (+6.5% vs. 2Q’21 to US$ 73.50/barrel), but there was a surprise in production, which fell -5.5% vs. 2Q’21 to 530 kboe (below REP’s guidance’21 of 590 kboe). The refining margin rose, as expected, to US$ 3.20 (vs. US$ 1.50 in 2Q’21) and above REP’s guidance of US$ 2 and our estimate of US$ 1.50. The 3Q’21 results will be released on 28/10, and following this trading statement we raise our 3Q’21e Net Profit estimate to € 550 M (+37.5% vs. previous estimate and -14% vs. consensus, € 643 M). Against this backdrop of rising gas and oil prices, as well as the solid performance in the chemical business and the increased refining margin, we will raise our annual estimates, bearing in mind that the consensus has raised its estimates by +23% in EBIT’21 over the past 3 months. Raising our estimates would mean improving our T.P. by around +5/+10% to € 13.25/sh.

SACYR. The Investor Day for the Concessions business confirms our positive outlook. BUY.
The company provided more visibility on its Concessions business (~88% of estimated EV) and we believe the numbers for 2025 in the strategic plan (sales and EBITDA +21% and +66%, respectively, above 2020) make sense. The company also released its valuation of the Concessions business: € 2.61 Bn (+32% vs. € 1.97 Bn BS(e)), suggesting a spread of € 1.04/sh. vs. our own valuation, +40%. Although we do not think the market will price in all the value SCYR claims its Concessions business is worth, we think the stock is clearly undervalued and we see upside for our own valuation following this meeting. We reiterate our BUY recommendation and T.P. of € 2.74/sh. (+26% upside).