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IBERIAN DAILY 22 JULY + 2Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, DOMINION, IBERDROLA, IBERPAPEL, METROVACESA, TELECOM SECTOR.

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

MARKETS YESTERDAY AND TODAY

Rally continues, today we await the ECB
Tuesday’s rally was consolidated with a new session of rises, where peripheral debt (especially the IBEX) stood out. In the US, the “buy the dip” continued, with value once again beating growth, and all this benefiting from the solid results campaign in a session lacking noteworthy macro references. Thus, in the Euro STOXX, all the sectors closed in positive numbers, with Travel&Leisure and Banks leading the gains, compared to Pharma and Household Goods, which were the worst relative performers. On the macro side, the EU has refused to renegotiate with the UK on the Northern Ireland protocol signed in Brexit. In the US, the group made up of Democrats and Republicans stated that it would be close to reaching an agreement on a US$ 1.2 Tn infrastructure package, whereas the budget office (CBO) warned that the debt limit would be reached in Oct/Nov’21. In US business results, Johnson&Johnson and Coca-Cola beat expectations, M&T Bank came in below.
What we expect for today
European markets would open with slight gains in a session that could be volatile awaiting the ECB’s message, and with the Basic Materials sector pressured by the sharp drop in iron ore. Currently, S&P futures are up +0.05% (the S&P 500 ended up +0.11% vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 17.91). Asian markets are trading with mixed results (China’s CSI -0.05% and Japan’s Nikkei +0.6%).
Today the ECB will meet, in the euro zone we will learn July’s consumer confidence and in the US weekly jobless claims, Chicago Fed and June’s second-hand home sales. In US business results, Domino’s Pizza, Abbott Laboratories, Intel and Twitter, among others, will release their earnings.


COMPANY NEWS

IBERPAPEL. 1H’21 Results in line, still showing some recovery. BUY.
The company released at yesterday closing bell 1H’21 Results that continue to show some recovery in demand and in line with our EBITDA estimate (€ 14.3 M; +12% vs. 1H’20). Paper sale volume rose by +27% vs. 1H’20 with prices still below the same period last year but +6% above 1Q’21 levels. Net cash totalled € 47 M (vs. € 32 M as of Dec’20). In this regard, IBG suggests a price recovery process in the 2H’21. As the positive trend in volume and prices continues, we would expect a moderately positive reaction, especially since the share price has underperformed the Ibex by -7% YtD. Conference call today at 12:00 (CET).

G.DOMINION. Better 2Q’21 Results on the operating level, the group kept its 2021 guidance unchanged. BUY.
EBITDA totaled € 27.9 M (+9% vs. consensus) thanks to higher-than-expected adjusted sales (+41% vs. 37.5% consensus; +23% organic vs. 2Q’19) and margins (11.1% vs. 10.5% consensus). Net Profit also came in above expectations (€ 10 M vs. € 9.2 M consensus), offering the company a very good position to beat its 2021 guidance (double-digit sales growth vs. 2019, vs. +8% consensus and +19% for 1H’21) and >+25% Net Profit growth (vs. +22% consensus and +31% for 1H’21). This, along with the good performance of net cash, which remained stable at € 83 M (vs. € 89 M BS(e)), should continue to underpin the share price despite its good recent performance (+4% since 1Q’21 Results; +9% vs. IBEX).

2Q’21 Results highlights and rest of previews.
Among the companies releasing their earnings next week, on the positive side we highlight Grupo Catalana Occidente (release date 29/07), bearing in mind the robustness of the Traditional Business, where the Recurring Result would rise +1% vs. 1H’20 despite a more adverse claims rate and Credit Insurance with a Combined Ratio that would be even lower than in 1Q’21. This would mean an almost doubling of the Recurring Result vs. 1H’20, where the best reading is that a normalisation in 2022 is becoming more and more likely.

AEDAS, BUY
As expected, the end of June (the 1Q for AEDAS) saw a very positive performance in commercial activity (pre-sales) although relatively few deliveries and thus low revenues in the P&L statement due to the seasonality in the delivery pace. With this in mind, deliveries over the period exceeded our expectations: 268 homes at an average price of € 440k vs. 229 units at € 340k. Thus, sales in the 1Q’21 totalled € 107 M (+295.2% vs. +186.3% BS(e) and +212.5% consensus), accounting for only 14% of the company’s 2021 expectations.
The EBITDA margin came in at 18.2% (vs. 17% consensus vs. 14% BS(e)), below 2021 estimates as the low level of deliveries does not dilute fixed costs.
On the commercial front, net pre-sales totalled 816 units (vs. 810 units BS(e)), which is a good level although in line with the comments made by the company at the CMD held at the end of June.
Although the delivery figure exceeds our expectations this is due to a calendar effect, and thus we do not believe this will have a relevant market impact. Commercial sales are strong but in line with expectations. We reiterate our BUY recommendation.