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ENDESA: 2021-2023 STRATEGIC PLAN UPDATE (ANÁLISIS BANCO SABADELL)

From the 2021-2023 strategic plan we highlight: (i) The 2020 dividend stands out: ELE has proposed a positive surprise of € 1.90/sh. (7.8% yield), +11% vs. our estimate and +18% vs. consensus). This improvement was partially expected but not guaranteed. The reason lies in the positive one-offs transferred to dividend by ELE in its 100% payout policy. However, the company maintains its plan of cutting payout to 70% starting in 2023 (meaning a 5.4% yield in the long-term (ii) As regards its medium and long-term targets, we see a moderate revision in 2021-22 to propose 2023 levels in line with what we could expect from the previous 2020-22 plan. Specifically, ELE cut its EBITDA and Net Profit targets’21-22 by -4%/-5% on average, respectively, due to the nuclear tax in Catalonia and lower gas margins. In any event, we stress that our estimates are still -4% below those proposed by ELE (-1% consensus) in both EBITDA and Net Profit. In this regard, we believe that following the negative reaction to Enel’s strategic plan yesterday (ELE slid -4% vs. IBEX), when this cut to targets could have been assumed, the market has already priced in this scenario.
This new plan has a very limited impact on our estimates, where we apply slight changes due mainly to the consideration of one-offs on the year (-3.2% and -2.6% in EBITDA/NetProfit’20 and +3.7% and +2.9% in recurring terms). As for the bet on renewables, we maintain our estimate that 2.7GW will be put on stream in new capacity until 2023 (+103% vs. 2020).
We take the opportunity to roll over our model (contributing +5% to the valuation), also including in the valuation (not in our estimates) the pipeline: we assume 5 GW adjusted for risk (50% probability vs. the additional 7.3 GW announced), adding another 2% to our valuation. Thus, we place our T.P. at € 28.04/sh. (+15% upside). If we perform a sensitivity analysis of the T.P. to achievement of the 2023 strategic plan and assign a 100% probability to it all (€ 4.3 Bn of EBITDA vs. our estimate that is -8% lower), we obtain an additional +9% upside. The current share price is factoring in an EBITDA level in line with our estimates, but with a growth in perpetuity rate 60bps lower (to >0.4%).