EUR 100.00 For Business Accounts Only

IBERIAN DAILY 01 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: GREENING, MELIÁ HOTELS, SANTANDER, TALGO, UNICAJA.

A very positive July for stock markets
After last week’s gains, this week kicked off both in the US and Europe with slight gains, thus bringing to a close a very positive month of July for almost all the stock markets, where the S&P rose +3.1%, the Euro STOXX +2.0% and the IBEX +0.51% after falling yesterday. In the Euro STOXX, the best-performing sectors were Basic Materials and Energy, whereas Food and Household Goods ended with the biggest losses. On the macro side, in the euro zone the 2Q’23 GDP rose more than expected to 0.6% YoY. July’s general inflation stayed rooted to 5.3% YoY, as expected, whereas the core figure rose to 5.5% YoY. In Germany, July’s retail sales fell more than expected. In Mexico, the 2Q’23 GDP rose more than expected to 3.7% YoY. In Japan, the final manufacturing PMI was raised to 49.6. In China, the Caixin manufacturing PMI for July fell to 49.2. In Australia, the Central Bank has kept rates unchanged at 4.1% unexpectedly. In US business results, On Semiconductor and Hologic beat expectations, AvalonBay was in line.
What we expect for today
European stock markets would open flat after a mixed session in Asia, with Japan rising and China falling. Currently, S&P futures are flat (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US rose (VIX 13.63). Asian stock markets are mixed (China’s CSI 300 -0.60%, Japan’s Nikkei +0.80%).
Today in the euro zone we will the final manufacturing PMI and unemployment rate for June, in the US July’s final manufacturing ISM and in Brazil July’s industrial output. In US 2Q’23 Results, Merck, Pfizer, Marriot and Pioneer, among others, will release their earnings.


COMPANY NEWS

MELIÁ. Margins beat expectations and exceed 2Q’19 levels. BUY
The trend has continued throughout 2Q’23 (RevPAR +15% vs. 2Q’22), with a significant improvement in occupancy (+4pp; -2.5pp vs. 2Q’19). The EBITDA figure came in above expectations (0.0% vs. -6.3% BS(e) and -4.2% consensus), achieving a better margin (27.4% vs. 26.3% BS(e) and 26.6% consensus) that beat 2019 levels (~26%), despite the inflation and higher rents, and at the same time this allows for greater visibility on reaching the EBITDA margin’24 target (+300bps vs. 2019; vs. -80bps BS(e) and -70bps Bloomberg consensus). Positive outlook with on-the-books bookings up +20% vs. 2022 (for the rest of the year, including resort and urban hotels). We expect a neutral/positive reaction, where apart from the solid results, the recent outperformance (+46% in absolute terms and +25% vs. IBEX) could weigh on the stock, and asset sales could continue to be delayed. Our T.P. has a sensitivity of ±3% for every ±20bps of EBITDA margin, and thus if we assume the entire improvement, our T.P. would rise around +30% (to €~9/sh. vs. € 7/sh. consensus).

TALGO, BUY
At yesterday’s closing bell the company announced that it has been awarded the extension of the maintenance contract on TLGO’s high-speed trains (series S-130 and S-730) through 2027 for a total of € 181 M (~4% of the backlog). Despite the fact that this is not a very significant amount, it is a maintenance contract that usually has higher margins (than manufacturing), and separately, it appears that this would stress that the relationship between TLGO and Renfe (one of its main clients) remains cordial after sanction proceedings were opened due to the delay in the delivery of Avril trains.