EUR 100.00 For Business Accounts Only

IBERIAN DAILY 14 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: IAG, NEINOR, SACYR, TALGO.

The earnings season kicked off to a good start
It was a positive week for most European indices, driven by the earnings release of large banks in the US last Friday, with the Ibex closing above 11,700 points. Thus, in the STOXX 600, most sectors closed with gains (15/20), led by Pharma and Insurance vs. the bigger losses of Basic Resources and consumer Goods. On the macro side, in the US, September’s production prices climbed more than expected and the University of Michigan consumer confidence dropped slightly more than expected after two positive straight readings. In China, September’s inflation moderated more than expected whereas production prices slowed down significantly. On another note, the Finance Ministry announced last Saturday a stimulus plan of 2.0% of GDP without many details. In US business results, Wells Fargo, JP Morgan, Bank of NY and BlackRock beat expectations.
What we expect for today
Stock markets would open flat with some bearish bias with the good performance of sectors with exposure to China. Currently, S&P futures are flat (the S&P 500 ended unchanged vs. the European closing bell). Asian markets are climbing (China’s CSI 300 +2.0%, Japan’s Nikkei is closed).
Today in the euro zone we will learn August’s industrial output, in Germany October’s ZEW index, in Spain September’s final and core inflation and in the UK ILO unemployment rate and number of unemployed. In US business results, today Bank of NY, JP Morgan and BlackRock will release their earnings.


COMPANY NEWS
IAG, OVERWEIGHT
British Airways (BA; 52% of IAG’s capacity 2024 BS(e)) would be readjusting its long-haul capacity calendar in view of the delay in the delivery of Rolls-Royce’s engines and components, particularly the Trent 1000 engines installed in the B-787 model. The problem is not expected to be solved in the short-term. In any event, the company has outlined that a flight on the same day with British Airways and with any of the associated companies can be offered to most of the passengers affected. Negative news, as the company offers fewer frequencies/routes although the impact could be limited as it will provide an alternative to the passengers affected. On another note, the fact that the seats offer on the market remains hit by the different problems of engine/aircraft providers (BA is not the only company affected) will continue to add upward pressure on prices, in our view, which we welcome. With this in mind, in the 3Q’24 Results (to be released on 08/11) we expect the management team to unveil further details in this regard.

NEINOR HOMES. T.P. update on better prospects in the sector and in the co-investment business. OVERWEIGHT.
We have raised our T.P. by +19% up to € 17.14/sh. (+18% upside) after adding to our model the latest agreements reached in the co-investment business and upgrading our margin estimates for the coming years thanks to the good sector prospects and also following the roll-over of our model through Dec’25. Even through the share price is no longer cheap after a total return of +100% since it unveiled its new strategic plan (including dividends, +58% vs. IBEX35), we believe it still has additional upside, being highly underpinned by the dividend payments. HOME plans to pay out € 250 M (or € 3.34/sh.) over the next 18 months (23% yield). We reiterate our OVERWEIGHT recommendation.

SACYR, OVERWEIGHT
SCYR has been awarded the concession of the Ruta del Itata roll road (Chile). The project has associated investments of around € 516 M and it would include the construction works for the rehabilitation and extension of the toll road (96km in total), as well as the management for a minimum period of 18 years (€ 1.2 Bn revenue backlog). This is the fourth concession awarded in 2024, which confirms SCYR’s positive growth prospects, reinforcing its footprint in a well-known region (in Chile it has 21 concession assets: toll roads, airports and hospitals). We estimate an equity contribution to the project (100%) of around € 75-105 M BS(e) (vs. € ~1 Bn expected over 2024-27e).