EUR 400.00 For Business Accounts Only

IBERDROLA: 2020-2025 CMD (ANÁLISIS BANCO SABADELL)

We believe that the plan presented by the company is only a first approach to a plan covering a much longer period of time (years 2030-2035). Although the level of investment has already increased significantly this year (40%), IBE reiterated yesterday its intention to keep this high pace of investment because this is the right time to do it (with many interesting investment opportunities, especially in the renewables sector), the circumstances are present (we are undergoing a fourth industrial revolution in the global energy sector), the company knows how to do it and, above all, it has access to credit to carry it out. Thus, although the company could have opted for cutting the level of investment and raising the dividend in line with its peers (100% payout and ~8% yields), it has placed its bet on strong investment levels in the medium-term in order to pay out a better dividend in the very long-term. If the company did not take this opportunity, it would probably “miss a train”.
That said, the main objectives of the plan are very much in line with our long-term estimates (2025): +6.8% CAGR’19-25 in EBITDA (vs. our estimate of +6.6%) and +6.6% in Net Profit (+7.5% BS(e)). The consensus does not have data for 2025, but our estimates stand +5% above on average in EBITDA’20-24 and +1% in Net Profit. As for the dividend, the company’s target refers to the floor level, which goes from € 0.40/sh. (3.8% yield) over the 2020-22 period to € 0.44/sh. (4.1%) in 2023-25. But the company has also mentioned that its dividend policy will range from a 65% to a 75% payout, which, if applied to its Net Profit target, would mean between € 0.53/sh. and € 0.56/sh. (~5% yield) in 2025. Our estimate stands +23% above this floor level in 2022 (+6% vs. consensus) and +28% in 2025 (+4% vs. the guidance of € 0.53-0.56). In short, we expect an average yield of 4.5% over the 2020-25 period, in line with the consensus.
On the occasion of this CMD we fine-tune our estimates (+3% in EBITDA and +2% in Net Profit on average over the 2020-25 period), with a very limited impact on valuation. According to our estimates, IBE generates average FCF of € 3.5 Bn annually, meaning a 5% yield on the market cap. After raising our CAPEX estimate to include new growth projects and rolling over our model, our T.P. remains practically unchanged at € 11.89/sh. vs. € 11.83/sh. previous. We maintain our BUY recommendation and reiterate that the stock’s positive momentum remains unspoiled.