EUR 100.00 For Business Accounts Only

IBERIAN DAILY 07 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY SECTOR, GRIFOLS, NEINOR HOMES, REPSOL, TELEFÓNICA, TOURISM SECTOR.

Widespread selling on stock markets
European stock markets suffered heavy losses, dragged down by the prospects of rate hikes by the Fed. With all the Euro STOXX sectors in the red, defensive sectors like Food and Telecoms suffered the least, whereas Real Estate and Travel & Leisure took the biggest losses. On the macro side, in Germany May’s factory orders rallied more than expected. In the euro zone, retail sales stagnated in May. From the ECB, Lagarde approved the proposal to reform the tax regulation requiring common safeguards for all member states, which will require raising revenues or cutting costs in highly-indebted states. As for monetary policy, she believes there is still work to be done to reduce inflation. Along this same line, Nagel stated that the ECB will continue to raise rates and will keep them high for a long time. In the US, weekly jobless claims rose slightly more than expected, while the ADP private employment survey for June came in far above forecasts, with job creation doubling the expected figures. May’s trade deficit was reduced in line with expectations due to the drop in imports. Lastly, June’s non-manufacturing ISM rose more than expected, with employment and new orders standing out, while the price component fell. In her visit to China, Janet Yellen was open to dialogue, although making it clear the US will continue to make decisions to protect its national security when needed. From the Fed, Logan (with vote) believes a rate hike in June would have been appropriate and that it is important to continue the path set out, with two more hikes this year. In Japan, May’s preliminary leading indicators rose more than expected. From the BoJ, Uchida chilled expectations of a change in monetary policy, defending the curve control programmes (YCC) for a longer time. In China, PM Li reiterated the commitment to implement measures to support the economy, although the lack of specifics continues to disappoint the market.
What we expect for today
European stock markets would open with gains of +0.5%, although US employment data could lead to new volatility. Currently, S&P futures are down -0.08% (the S&P 500 was up +0.35% vs. the European closing bell). Volatility in the US rose (VIX 15.44). Asian stock markets are sliding (China’s CSI 300 -0.14%, Japan’s Nikkei -0.45%).
Today in Germany we will learn May’s industrial output, in Mexico June’s inflation and in the US non-farm job creation, salary gains and June’s unemployment rate.


COMPANY NEWS

REPSOL. 2Q’23 trading statement reflects sharp drop in refining margin and HH price. BUY
As expected, the refining margin fell significantly in 2Q’23 (to US$ 6.40 vs. US$ 15.60 in 1Q’23 and US$ 6.91 consensus); the 1H’23 average (US$ 11) would still make the annual guidance of around US$ 9 (BS(e) and consensus) achievable. The price of Brent crude fell to US$ 78/barrel (-3.8% vs. 1Q’23, -31% vs. 2Q’22; in line with the annual guidance of US$ 80), the price of gas (Henry Hub) plummeted to US$ 2.10/MBtu (-38% vs. 1Q’23, -70.8% vs. 2Q’22; where there would be a risk of not reaching the guidance of US$ 4) and production to 595 kboe (-2.1% vs. 1Q’23, vs. 540 kboe in 2Q’22) due to operating incidents that would recover in 2H’23 and would make the target of ~605 kboe attainable. With this trading statement, the 2Q’23 results (27/07) would reflect €~750 M of adjusted Net Profit (-61% vs. 1Q’23), in line with the consensus (€ 775 M). We expect a neutral reaction following the sharp drop on the year (-11%).

ELECTRICITY SECTOR. Conclusions on impact from latest RD
On 28 June, MITECO released a new RD updating the reference pool prices for remuneration on renewable energies, whereby that of 2023 is reduced -49% vs. the previous. The main impact of this update comes on the P&L level, although on the cash and valuation level the impact would be very small, as the cashflow from energy sales already depended on the real market price (and not on the reference price), and the regulatory return is guaranteed. The main impacts on EBITDA’23 come in Ence (-54% vs. previous), Ecoener (-30% vs. previous) and Acciona Energía (-14% vs. previous). In the case of Solaria and the integrated utilities, the impact is insignificant. We slightly lower our T.P. in Acciona Energía, Acciona group and Ecoener (-1.6%, -1.5% and -3.5%, respectively) based on a new pool price estimate that is an average of -6% lower for the next three years vs. our previous estimate and we maintain our BUY recommendation in all three stocks. Although our positive fundamental view remains unchanged, we do not expect the stocks to outperform the IBEX in the short term, as with the release of their half-year results these impacts will be evident.