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IBERIAN DAILY 31 JULY + 2Q’24 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAIXABANK, COLONIAL, ENCE, FERROVIAL, GRIFOLS, OHLA, REDEIA, ROVI, TALGO, TELEFÓNICA, 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 2Q’24 results to be released over the coming days in Spain.

Rally amid business results
There was a slight rally on the marked, marked more by the results presentations than by the cycle. In the STOXX 600, the best-performing sectors were Construction and Insurance, whereas Basic Materials and Energy ended with the worst performance. On the macro side, in Spain the 2Q’24 GDP beat expectations, whereas July’s inflation fell more than expected, as did the core figure. In the euro zone, the preliminary 2Q’24 GDP reading rose above the consensus despite the unexpected drop in activity in Germany. In the US, Conference Board consumer confidence once again rose in July. As for JOLTS job openings, they came in above expectations, although falling since May. In Japan, the BoJ raised rates to 0.25% (+15bps) and considers halving the purchase programme by 1Q’26 (US$ 19 Bn/month). In US business results, Microsoft (although with cloud revenues slowing), ADP, Paypal and Pfizer beat expectations, Merck&Co, Sysco and Starbucks were in line.
What we expect for today
Stock markets would open with gains, but slightly affected by the technology sector. Currently, S&P futures are up +0.37% (the S&P 500 ended up +0.26% vs. the European closing bell). Asian stock markets are rising (China’s CSI 300 +1.83%, Japan’s Nikkei +0.40%).
Today in Germany we will learn June’s retail sales and July’s number of unemployed, in the euro zone July’s inflation, in Brazil the unemployment rate and the BoB meeting and in the US July’s ADP private employment survey, June’s pending home sales and the Fed will meet. In US business results, DuPont, T-Mobile, Boeing, Kraft Heinz, Mastercard, eBay and Meta, among others, will release their earnings.

COMPANY NEWS

CAIXABANK. 2Q’24 results above expectations in all headings and guidance’24 raised. OVERWEIGHT.
Net Profit beat our expectations and the consensus by +6%. On the negative side, other provisions (€ -103 M vs. € 70 M BS(e)) due to legal contingencies. CABK has once again raised its guidance’24: (i) NII to high-single-digit growth from the previous mid-single-digit (+3.8% BS(e) and +5.8% consensus); (ii) ROTE’24 >17% vs. previous 16% (16.9% BS(e) and 16.6% consensus) and 16.9% reported as of 2Q’24; (iii) NPL ratio of 2.7% vs. 3% previously (3% BS(e) and 3.2% consensus), in line with 2Q’24. CoR guidance remains at ~30bps (vs. 29bps in 2Q’24) and € 12 Bn of shareholder remuneration in 2022-24, meaning a yield with buybacks in 2024 of >12%. We expect a positive reaction.

COLONIAL. Reasonably positive 1H’24 Results. OVERWEIGHT.
Reasonably positive results, above our expectations in rents although explained by a one-off and in line in EBITDA. Rents € 192 M (+5% vs. +1% BS(e)); EBITDA: € 153 M (+0.4% vs. -0.1% BS(e)). LfL rents grew +6% (+5% BS(e)) due to indexation and renewal improvements. LfL GAV rose +0.7% in 2024 due to the improvement in rents and to reforms. NTA fell -3% on account of the dividend. According to COL, appraisals are stabilising. The company reiterated its EPS guidance’24 (€ 0.30/0.32), outlining that the bias is towards the top range. LTV as of June’24, assuming sale commitments and Criteria’s capital increase, would stand at 44% (vs. 47% as of Dec’23). Excluding these adjustments, LTV would have grown around +130bps.

ENCE. Solid results beating expectations on operating and financial level, thanks to pulp business. OVERWEIGHT
2Q’24 sales reached € 244.8 M (+64.6% vs. +57.4% BS(e) and +57.9% consensus), with pulp sales of € 199.9 M (+28.5% vs. +23.6% BS(e)) and renewable energy sales of € 45.9 M (+5.1% vs. -1.6% BS(e)). 2Q’24 EBITDA rose to € 65.5 M (vs. € 12.4 M in 2Q’23), around +4% above our estimate and the consensus. The 2Q’24 cashflow reached € 24 M and NFD fell to € 279 M (€ -44 M vs. 1Q’24). We expect a positive impact, even more so bearing in mind the stock’s poor recent performance (-10% in the past week in absolute terms and -1.2% YtD, underperforming the IBEX by -16%).

FERROVIAL. 2Q’24 Results above expectations on the operating level thanks to Construction. Highways in line. OVERWEIGHT.
2Q’24 Results came in above expectations on the operating level (EBITDA € 349 M vs. € 325 M BS(e) and € 331 consensus) thanks to the better performance of Construction (EBITDA € 116 M vs. € 85 M BS(e) and consensus), where margins reached 4.0% EBIT in 2Q’24 (vs. 2.6% BS(e) and consensus). The performance of Highways was more in line with expectations (EBITDA € 225 M vs. € 235 M consensus) and despite slight slowdown on the quarter it continues to show strength in traffic and rates (between +4% and +34% in Managed Lanes vs. +3.4% soft cap). Cash ex infra fell € -1.12 Bn to € 35 M due to the heavy investments in growth (BTO and IRB). We do not foresee a relevant impact following the good share price performance (+17% in 2024; +6% vs. IBEX).

GRIFOLS, OVERWEIGHT
2Q’24 Results came in below expectations on the operating level (EBITDA € 414 M vs. € 435 M BS(e)) and € 437 M consensus) and in line in NFD, which fell by -16% to € 8.27 Bn (5.5x NFD/Adj. EBITDA vs. 6.8x in 1Q’24). FCF became positive, with € 57 M of generation in the 2Q’24, in line with expectations. The company kept its adjusted EBITDA guidance’24 > € 1.8 Bn vs. € 1.79 Bn consensus and debt at 4.5x NFD/EBITDA.
We do not foresee a relevant impact from these 2Q’24 Results. We believe that the market attention will be drawn to the newsflow on the potential TOB by Brookfield and the Grifols family. Note that the share price has slid -41% YtD (-51% vs. IBEX).

REDEIA, OVERWEIGHT
1H’24 Results were in line with expectations. Thus, 1H’24 EBITDA came in at € 361.3 M (-13.7% vs. 1H’23, vs. -14% BS (e) and consensus) whereas Net Profit totalled € 269.3 M (-23.9% vs. 1H’23, vs. -24% BS (e) and consensus), due mainly to the impact from the finalisation of the regulatory useful life of assets pre-98. This is in line to meet the 2024 guidance, which was reiterated by the company: EBITDA > € 1.3 Bn and Net Profit around € 500 M, in line with BS(e) and consensus.
We do not foresee any impact from these results. RED share price has climbed +17.4% YtD vs. +14.4% Ibex and we maintain our OVERWEIGHT recommendation (T.P. € 19.50/sh.). Conference Call at 11:30 (CET), where the key will lie in the new electricity network regulatory framework 2026-31 (after initiating several public consultations on financial remuneration, methodology and limits on investments in June), the draft of the new network infrastructure plan 2025-2030 and the potential sale of Hispasat (provided that it fits from a financial point of view and creates value for shareholders).

ROVI, UNDERWEIGHT
The 2Q’24 results beat consensus estimates on the operating level (€ 44 M of EBITDA vs. € 45 M BS(e) and € 38 M consensus; +44% vs. 2Q’24) and marked by falling CDMO sales (-8% vs. -8% BS(e)), due to lower technology transfer revenues. This, however, had a positive impact on the profitability level (gross margin +1,130bps to 61.8% vs. 61.2% BS(e)). On the outlook level, the company maintains its guidance’24 of a mid-single-digit drop in sales (vs. +0.4% BS(e) and +0.1% consensus). NFD was in line with expectations (rising € 8 M to € 74 M vs. € 80 M BS(e)) due to the progress in the buyback plan (€ -17 M).
We do not expect a relevant impact following the stock’s good performance (+43% on the year; +32% vs. IBEX).

TALGO, UNDERWEIGHT
The 1H’24 sales rose +19.9% to € 346.1 M, beating expectations, and EBITDA came in at € 40.9 M (+16.9%), in line with expectations, with a margin of 11.8% (vs. 11.6% in 1H’23). We highlight the significant working capital consumption (€ 495 M vs. € 304 M in 1H’23), which leaves NFD at € 357 M (vs. € 175 M in 1H’23), with a NFD/EBITDA ratio of 4.3x. The company has updated its guidance’24, raising sales and maintaining EBITDA margins at 11.5%, and raising working capital needs (from stable to growing) and increasing expected leverage to 3.5x EBITDA (vs. 3.0x previously).
All eyes will be on the TOB under way. In this regard, the Board of Directors has answered Skoda’s letter, stating that at present it is not interested in continuing a process of this type, as it has a firm offer for the entire company on the table.

TELEFÓNICA, OVERWEIGHT
The 2Q’24 results beat expectations in sales (+2.1% vs. consensus) and EBITDA (+1.5% vs. consensus) thanks to HispAm (22% of group revenues). On the positive side we also highlight Brazil and Telefónica Deutschland, which once again showed very positive performance in margins (+70bps vs. BS(e)). On the domestic market the results are basically in line. Futhermore, the company has announced an agreement with VOdafone to create a FiberCo with ~3.5 M homes passed (confirming market rumours) and negotiations with Millium for the sale of the COlombian business (3% of group EBITDA).
We expect a positive reception today for the solid results and the announcements made (+9% vs. IBEX in 2024).

VISCOFAN, OVERWEIGHT
2Q’24 Results below expectations in sales although EBITDA came in above our expectations and below those of the consensus (+3.5% vs. +0.5% BS(e) and +5.3% consensus), meaning a better margin (23.1% reported vs. 22.1% BS(e) and 22.8% consensus), which grows by +200bps vs. 2Q’23. The quarterly performance was marked by: (i) the fact that casing volumes continue to be affected by the inventory adjustment process, although with collagen and fibrose volumes showing an improvement; (ii) lower revenues from energy sale. No comments were made on the 2024 guidance, and thus we assume that the company reiterates its targets.
Results below the consensus expectations although on the positive side we stress that the company did not cut its guidance thanks to the good prospects to capture growth and improve margins.