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IBERIAN DAILY 27 APRIL + 1Q’23 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AEDAS HOMES, BBVA, CELLNEX, EBRO FOODS, FERROVIAL, REPSOL, 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’23 results to be released over the coming days in Spain.

Results drag down stock markets
The European stock markets ended in the red on disappointing business results presentations (software developer Dassault Systems slid -6.5% after releasing its earnings). Within the Euro STOXX, most sectors fell, with Real Estate and Energy being among the few sectors that posted gains. By contrast, Consumer Goods and Pharma were the worst relative performers. On the macro side, ECB Vice-President L. de Guindos warned about the risk of significant wage pressures in view of the persistent core inflation and a tense labour market in the Euro zone, which could back further rate hikes. In Germany, the Govt. raised the GDP’23 growth figure by two tenths to 0.4%. In the US, March’s preliminary core capital goods orders contracted more than expected, hinting at a drop in capital goods investment in 1Q’23. In China, March’s industrial profit contracted sharply once again in March (-21.4% YoY). In US business results, Blizzard, Activision, Meta, and eBay came in better, and Boeing worse.
What we expect for today
European stock markets would open with losses of -0.35%. Currently, S&P futures are up +0.34% (the S&P 500 ended -0.70% lower vs. the European closing bell). Volatility in the US rose (VIX 18.84). Asian markets are mixed (China’s CSI 300 +0.13% and Japan’s Nikkei -0.05%).
Today we will learn in Spain March’s retail sales and the 1Q’23 unemployment rate, in the Euro zone, April’s economic climate index, in Mexico March’s trade balance, and in the US weekly jobless claims, the preliminary 1Q’23 GDP and March’s pending home sales. In US business results, Amazon.com, Intel, T-Mobile, Hasbro, Linde, Caterpillar, Merck&Co and American Airlines, among others, will release their earnings. In debt auctions: Germany (€ 2.5 Bn in bonds due 2035).


COMPANY NEWS

CELLNEX. Good Results and in line with expectations. BUY.
Results in line with expectations, with 1Q’23 EBITDA growing +15% and € 336 M of RLFCF (Recurrent Levered FCF / +12% reported and +19% organic vs. 1Q’22; +1% vs. BS(e) and -1% vs consensus), meeting the target of keeping organic growth above +5% in PoPs (+6.8%). NFD rose up to € 20.01 Bn (vs. € 19.84 Bn in 2022 inc. IFRS16 and € 19.85 Bn BS(e)), meaning 7.3x NFD/EBITDA and maintaining the commitment to obtain the investment grade by S&P in 2024 at the latest. The company reiterated its 2025 targets (we assume that also for 2023). The appointment process of the new CEO is about to be completed. We do not expect these results to have a significant impact on the share price despite its +10% rally vs. IBEX YtD.

EBRO FOODS. 1Q’23 EBITDA far above expectations. We raise our T.P. by +18% and change our recommendation to BUY.
The 1Q’23 results came in far above expectations in EBITDA (+10.7% vs. -4.6% BS(e) and +1.1% consensus), underpinned by better performance in sales (+11.6% vs. +3.6% BS(e) and +5.3% consensus) and margins (11.9% vs. 11% BS(e) and 11.5% consensus). We raise our 2023-26 EBITDA estimate by ~+11% and set a new T.P. at € 19.30/sh. (+12% upside). We upgrade our recommendation to BUY (from SELL) in view of its defensive nature, the support of this set of results, and its undemanding valuation (9x EV/EBITDA; 3,3% yield), which should back the stock’s outperformance (+18% YTD; +5% vs. Ibex).

REPSOL. Very good 1Q’23 results, especially in Industrial. BUY.
1Q’23 Results above expectations in adjusted Net Profit, reaching € 1.89 Bn vs. € 1.5 Bn consensus (+78% vs. 1Q’22 and +41% consensus). By divisions, Upstream came in at € 474 M (vs. € 731 M in 1Q’22 and € 454 M consensus) on lower prices, higher production costs and amortisation levels. We are positively surprised by Industrial, whose Net Profit reached € 1.28 Bn (vs. € 236 M in 1Q’22 and € 1 Bn consensus) driven by the rise in the refining margin (US$ 15.60/barrel vs. US$ 6.80/barrel in 1Q’22). Commercial and Lower Carbon Generation (as Commercial and Renewables is now reported) came in at € 208 M (vs. € 117 M in 1Q’22 and € 173 M consensus). We expect a positive share price reaction following the stock’s poor performance in 2023 (-5% vs. +14% IBEX). BUY. T.P. € 18.02/sh. (+32.5% upside). Conference call at 12:00 (CET).

BBVA. BUY.
The company has obtained € 1.84 Bn of Net Profit (+17% vs. 1Q’22), ~+5% vs. the consensus estimate (+11% vs. consensus), which means a record RoTE of 16.3% (17.3% excluding the tax on revenues in Spain). NII (+43% vs. 1Q’22) came in ~+2% above expectations driven by Spain and Mexico, offsetting costs ~2% higher than expected as a result of Turkey’s high inflation. Thus, the better performance in Net Profit is explained by fee revenues (+16% vs. 11% consensus), the higher trading revenues and the lower CoR (105bps stable and in line with the guidance vs. 114bps consensus). Regarding the balance sheet, very good performance in capital, with the CET1 ratio standing at 13.13% (+52bps vs. 4Q’22 and vs. +12bps expected), stable loan quality (NPL ratio of 3.3%) and with no significant liquidity pressure in any region.
By countries, we are surprised by Spain (+36% in Net Profit vs. consensus), with stable deposits (-3% vs. 4Q’22 and vs. -1% lending; +16bps in beta deposits to 0.37% and +54bps in the customer spread), strong fee revenues and better costs and CoR. Mexico (+10% in Net Profit vs. consensus) has seen continuation of the strong dynamic in revenues and better cost performance. LatAm (+4% Net Profit) performed similarly to Mexico. On the negative side, we are beginning to see a deterioration in Turkey (slowing revenues and jump in costs) and higher CoR in Mexico (287bps vs. 245bps in 4Q’22), although within the guidance (