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ANNUAL SPANISH MARKET REPORT JUNE 2022 (ANÁLISIS BANCO SABADELL)

We are releasing our report on the Spanish market, in which we review our estimates and T.P. for all the stocks in our coverage universe and we highlight the top picks of our portfolios (model, 5-stock, high yield and Mid&Small cap). Throughout 2022, we have been increasing the cyclical profile of our portfolios to the detriment of the most defensive stocks, given that our macro scenario for the 2H’22 assumes a lower risk of an imminent recession. Of the total stocks within our coverage universe (58 vs. 57 in the last edition of this report in June’21), 86% have a BUY recommendation (vs. 75% previously) and 14% have a SELL recommendation (vs. 25% previously). In this report, we change from BUY to SELL: Acciona, due to a low valuation and because we prefer to play renewables through its subsidiary; Ebro Foods, since we believe that its exposure to inflation will continue to affect its margins; and Solaria, due to the lack of catalysts and low valuation. We change from SELL to BUY: Fluidra, as we believe that the correction (-42% from highs) has been exaggerated, and which we now include in our Mid&Small Portfolio replacing G. Catalana Occidente, and Técnicas Reunidas, where we see a lower financial risk and a better outlook for margins in the long-term. Additionally, we raise our target prices by +5% on average, with the most significant changes being: Arcelor Mittal (+52%), Repsol (+26%), Acciona Energía (+24%), Rovi (+16%), Acerinox (+14%), Bankinter (+14%). On the negative side, we lower the target prices for 14 stocks, with the most significant changes being those of Talgo and Ebro Foods (-12% both). Our Top-Down valuation of the IBEX as of Dec’21 stands at 9,250 points, with an implied P/E as of Dec’22 of 12.9x vs. the 12-month forward rate’s current trading levels of 11.5x and vs. 13.5x average expected for the 2010-2022 period. Our Bottom-Up valuation of the 12M forward stands at 11,186 points.