EUR 100.00 For Business Accounts Only

IBERIAN DAILY 18 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS, CAF, MAPFRE.

The Ibex above 10,600 points
It was a new week of gains for European stock markets despite the disappointing US inflation data although with the market betting on the beginning of rate cuts in June by the ECB. In the STOXX 600, Retail (after Inditex’s rally following its results) and Banks were the best-performing sectors whereas Real Estate and Technology ended with the biggest drops in view of the rally of sovereign debt curves. On the macro side, G. Makhlouf from the ECB (Ireland’s governor, dovish)and Pablo H. de Cos (BoS) were in favour of a clear change in the monetary policy at June’s meeting. On another note, Moody’s confirmed Spain’s Baa1 rating, improving its outlook from stable to positive, underpinned by greater balance in the growth model. In the US, the industrial output rose 0.1% vs. the stagnation expected although the previous data was cut. On another note, February’s import prices moderated in line with expectations, the University of Michigan consumer confidence dropped slightly in March and the Empire index fell much more than expected in March. In China, January’s-February’s data came in above expectations with growth in industrial output and investments in fixed assets speeding up and February’s retail sales moderating. In Japan, January’s machinery orders fell more than expected.
What we expect for today
European stock markets would open with slight gains in a week in which we will learn the decisions from the Fed, BoJ and BoE. Currently, S&P futures are flat (the S&P 500 ended up +0.31% vs. the European closing bell). Asian stock markets are climbing (China’s CSI 300 +0.66 %, Japan’s Nikkei +2.67%).
Today in Germany we will learn January’s import prices, in the euro zone February’s final inflation and in the US March’s real estate confidence index (NAHB).

COMPANY NEWS

MAPFRE. New targets 2024-2026. UNDER REVISION
At the AGM held last Friday, MAP announced the pillars of its plan and financial targets for the next 3 years, summed up as follows: (i) 6% CAGR’23-26 in premiums (vs. 9.8% in 2023 and 3.6% consensus in 2023-2025e).Meeting this target would mean exceeding € 32 Bn in 2026 , with an additional business of € 5 Bn. (ii) Average RoE of between 10 and 11%, with a la 11% target in 2026 (vs. 10% in 2023 and 10.3% 2023-2025e consensus average with around € 900 M of Net Profit’25). Based on our estimates, reaching an 11% ROE’16 would mean around € 1 Bn of Net Profit’26. (iii) Average combined ratio of 95-96% over the period with a 95% target in 2026 (vs. 97.2% in 2023 and 96.3% consensus in 2023-2025e). (iv) Solvency of around 200% (198% in 2023 without discounting around 9pp of transitory provisions) and high leverage ratio of around 24% (22.7% in 2023). (v) Maintaining a payout ratio of at least 50% (66.7% in 2023 with a DPS of € 0.15/sh.). The consensus estimates already include a slight improvement to revenues for the next two years, with CR and ROE, however, coming in at the low end of the range (and with lower premiums, and thus we think there is room for improvement. Assuming the company will meet its targets’26 at the high end of the range, and for a Ke of 11.6%, we estimate this means a T.P. of at least € 2.60/sh. (+25% upside). We believe the target is attainable, as long as the Non-Life portfolio does indeed see a profitability improvement, as according to our estimates the contribution of the new business alone would not be enough. Thus, MAP’s challenge continues to be a question of results delivery, although with the appeal of a high yield that we do not think is in jeopardy. We will adjust our estimates to the messages the company provides today. T.P. and recommendation UNDER REVISION.