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IBERIAN DAILY 12 MAY + 1Q’22 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS HOMES, GRIFOLS, MEDIASET ESPAÑA, TELEFÓNICA.

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.

Stock markets weathered the disappointing US inflation data… until today
The European stock markets managed to keep the gains made in early trading despite the higher-than-expected US inflation data, albeit with the possibility that it may have peaked in March. Within the Euro STOXX, Consumer Goods and Autos led gains, whereas only Energy and Pharma saw losses. On the macro side, in monetary policy, Lagarde yesterday confirmed the rate rise in July. in the US, April’s inflation slowed less than expected to 8.3%, whereas core inflation slowed to 6.2%, although the acceleration seen in the household income component is a source of concern. In Europe, the EU would suspend the Brexit agreement if the UK revokes unilaterally Northern Ireland’s protocol. On another note, the supply cut in one of gas pipelines crossing Ukraine would be partially redirected by another one (Sudzha). Lastly, Hungary is demanding that the crude oil imported through oil pipeline will be exempted from the veto to Russian crude oil. In US business results, Walt Disney came in better than expected.
What we expect for today
European stock markets would open with drops close to -2.0%, dragged down by technology groups, as seen in the US session yesterday and today in Asia. Currently, S&P futures are down -0.2% (yesterday the S&P 500 ended -2.17% lower vs. the European closing bell). Volatility in the US dropped (VIX 32.56). Asian markets are sliding (China’s CSI 300 -0.5% and Japan’s Nikkei -1.6%).
Today in the UK we will learn the 1Q’22 GDP, in the US April’s production prices and weekly jobless claims and in Mexico the Central bank will meet. In US business results, Motorola and Tapestry, among others, will release their earnings. In debt auctions: Italy (€ 5.5 Bn in bonds due 2025, 2029 and 2048) and Ireland (€ 1.25 Bn in bonds due 2030 and 2045).

COMPANY NEWS

MEDIASET ESPAÑA, BUY.
The results came in below the Bloomberg consensus’ expectations in EBITDA (-33% vs. -26% according to SACM) due to higher operating costs, as revenues are not similar. Thus, the EBITDA margin went from 27.9% to 18.3% as a result of a strong rise in operating costs (+16%, with rights consumption growing by +55%). According to the company, the rise in operating costs would be due to seasonal factors (in 2021, costs were highly skewed towards the month of July and in 2022 they are more evenly distributed over the year) and also to the fact that last year’s comparable basis was not representative due to Covid-19. As for the impact from inflation on the costs base, the company believes that it should not affect them as much as other sectors because most of its contracts are not indexed to inflation.
Strong cash generation in the last year. The company’s net cash position as of March 2022 was € 312 M vs. e 95 M in March 2021. Cash accounts for 24% of the market cap.
The company also mentioned that April was not a good month in terms of advertising revenues because the Auto and Telecom sectors delayed their advertising campaigns and also because of the calendar effect (Easter fell in the middle of April). Even though the results came in below expectations, we expect no impact on the share price, as the stock will move to the sound of the TOB from Mediaset Italia, which has offered 4.5 MFE shares (class A) for each TL5 share plus € 1.86 in cash, which at the current trading levels are equivalent to € 4.46/TL5 share (+8% vs. the current price, without taking into account the dividend recently announced by Mediaset Italia, which would add another +5% upside).

GRIFOLS. A floor on the operating level. We lower our T.P. to € 27.00/sh. and reiterate our BUY recommendation.
We cut our estimates by -12% in EBITDA’22 in order to reflect slower recovery in plasma supply, lowering our T.P. to € 27.00/sh. (vs. previous € 33.50; +40% upside). We expect debt to be high in 2022 (6.7x NFD/EBITDA, due to the Biotest deal), but we think a capital increase is unlikely, and despite the competitive threats (which could affect >25% of sales BS(e)), we still see an appealing risk-reward ratio. With all this in mind, we expect the robust demand to lead to an improvement on the operating level in 2022 (+26% in EBITDA’22 BS(e)) and a rerating of the stock, which is trading -42% below pre-pandemic levels (15x EV/EBITDA’22; -43% vs. CSL). We reiterate our BUY recommendation.

TELEFÓNICA. Better 1Q’22 results in sales (in all divisions) and EBITDA and improved cash generation. BUY.
The 1Q’21 results came in above expectations in sales (-9% vs. -12.9% BS(e) and -12% consensus), with better performance in all divisions, and in EBITDA (€ 3.18 Bn vs. € 2.9 Bn BS(e) and € 2.93 Bn consensus), with LatAm standing out (+43% vs. consensus, +9.2% excl. one-offs). In the Spanish market, sales increased by +1% (vs. +0.4% BS(e) and -0.7% consensus), and EBITDA stood in line with expectations (€ 1.13 Bn). 1Q’21 FCF also beat expectations (€ 513 M), but debt came in below at € 27.4 Bn (-23% YoY and +5.4% QoQ). We expect a moderately positive reception despite the fact that in 2022 the stock has outperformed the IBEX by +24%, but -3% since the high reached on 14/04.