EUR 100.00 For Business Accounts Only

IBERIAN DAILY 11 APRIL (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKINTER, FERROVIAL, IAG, REPSOL, TÉCNICAS REUNIDAS, UNICAJA.

Defensive sectors take up the reins
The week was marked by the poor readings in US leading indicators and the lower job creation numbers (although far from the poor forecasts). In the Euro STOXX, the best-performing sectors on the week were Energy (benefiting from the rally of Brent crude) and defensive sectors like Utilities and Telecoms, with cyclicals like Basic Materials and Industrials posting the biggest losses. On the macro side, in the euro zone, chief economist P. Lane left the door open to a rate hike in May if inflation remains in line with economic forecasts. In the US, weekly jobless claims rose more than expected, while the previous data was raised. This hinted at poor non-farm employment creation data in March, but in the end, it fell somewhat more than expected, although it stands at average levels. Moreover, wage earnings slowed more than expected, and the unemployment rate fell by a tenth unexpectedly. This would be compatible with +25bps rate hikes in May (the market prices in a 80% probability), whereas, from the Fed, J. Williams denied that rate hikes may aggravate the banking crisis. In China, March’s inflation slowed unexpectedly, whereas March’s industrial production prices contracted above expectations. This provides room for the PBoC to ease its monetary policy after the latest cut in the bank reserves ratio. On the geopolitical front, China conducted military manoeuvres in the Taiwan Sea, raising tensions with the US.
What we expect for today
The European stock markets would open with slight gains awaiting the US inflation data (to be released on Wednesday, 12 Apr) and the beginning of the earnings season with the results of the large banks (on Friday, 14 Apr). Currently, S&P futures are up +0.08% (the S&P 500 ended +0.36% higher vs. the European closing bell on 06/04). Volatility in the US fell (VIX 18.97). Asian markets are mixed (China -0.29% and Japan’s Nikkei +1.33%).
Today in the euro zone we will learn April’s SENTIX investor confidence index and February’s retail sales and in Mexico February’s industrial output.


COMPANY NEWS

IAG. We continue to see high upside potential. We lower our T.P. to € 2.40/sh. (-6% vs. previously). BUY.
The stock has performed poorly recently (-10% in absolute terms and -12% vs. IBEX), mainly affected by the Air Europa (AE) acquisition agreement and the existing doubts on debt overhang after the Covid-19 pandemic. We do not think the company’s financial position is a problem, neither on the side of debt maturities, nor in terms of interest rates or covenants. Moreover, the estimated impact from the acquisition of Air Europa will not be a game changer, resulting in a +0.3x increase in the NFD/EBITDA ratio’24 BS(e) (to ~2.2x NFD/EBITDA’24 BS(e)). We have fine-tuned our 2023-25 sales estimates BS(e) by +9% vs. previously in view of the higher prices, but cut our 2023-25 estimate by -20% due to cost inflation and fuel (+23% vs. previously). As a result, we cut our T.P. to € 2.40/sh. (-6% vs. previously) and reiterate our BUY recommendation. We see three catalysts: (i) the company’s results, which should reflect strong demand and balance sheet from 1Q’23 on; (ii) the drop in crude oil prices; and (iii) the CMD, which we expect to take place in the 2H’23e.