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IBERDROLA: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs 2Q'19 Results
EBITDA: € 2.168 Bn (-9.3% vs. -6.6% BS(e) and -7.5% consensus);
EBIT: € 1.032 Bn (-24.0% vs. -17.2% BS(e) and -16.3% consensus);
Net Profit: € 587.9 M (-13.6% vs. -19.5% BS(e) and -8.6% consensus).
1H'20 vs 1H'19 Results
EBITDA: € 4.918 Bn (-1.4% vs. -0.1% BS(e) and -0.5% consensus);
EBIT: € 2.675 Bn (-10.6% vs. -7.5% BS(e) and -7.1% consensus);
Net Profit: € 1.845 Bn (+12.2% vs. +9.7% BS(e) and +14.3% consensus).

The company has released 2Q’20 results below expectations in accounting EBITDA (-9.3% vs. -6.6% BS(e) and -7.5% consensus), although the gap vs. expectations was less significant in Net Profit due to lower financial costs and taxes. In any case, excluding negative one-offs linked to Covid-19 and isolating the positive one-offs as of the 1H’19 (transfer of GNL’s long-term supply contracts and resettlements in the Networks business in Spain), adjusted EBITDA as of the 1H’20 would have increased by +4.2% vs. -0.1% BS(e) and -0.5% consensus. As for accounting Net Profit in the 1H’20 (€ 1.84 Bn), the company has comfortably met its guidance of high single-digit growth (+12.2% vs. +9.7% BS(e) and +14.3% consensus) that in adjusted terms (€ 153 M for Covid-19 and capital gains from Gamesa in 1Q’20) is reduced to € 1.67 Bn, +1.7% vs. our estimate of -7.8%. NFD came in below expectations (€ 37.55 Bn vs. € 38 Bn as of 1Q’20 vs. guidance of € 39 Bn for 2020, in line with our estimate), benefitting to some extent from currency depreciation. The company’s liquidity position as of 1H’20 stood at € 14.62 Bn vs. € 14.35 Bn in 1Q’20.
Considering the stock’s recent good performance and the many adjustments included in these results, we expect a negative market reaction initially that, in any event, will depend on IBE’s comments in the conference call (9:30 CET). After having fallen by -27% from February’s highs to March’s lows (+9% vs. IBEX), not only has the stock regained all of the lost ground (it has risen by +41% from lows/+24% vs. IBEX), but it is once again trading at historical highs (+9% vs. February’s highs) and against the Covid-19 backdrop, it has beaten its sector in Europe, which has recovered 69% of the drop to lows vs. 95% in ELE, 75% in REE and ENAG and 32% in NTGY.
At current levels, our € 11.00/sh. T.P. yields no upside. However, we believe that the good momentum could continue until November’s CMD. We think that the company will confirm the continuation of high single digit growth in the long-term (forecasting a +10.4% CAGR’19-22 in Net Profit), which would continue to give rise to estimates upgrades by the consensus, as it foresees +7%. On another note, it should unveil a more ambitious dividend pattern, where we do not rule out an increase in payout (it currently pays 75%, at the low range of the sector). IBE has a comfortable liquidity position (covering 1.4x 2020-22 maturities) and every percentage point of improved payout would mean an additional dividend yield of 5bps vs. 3.9% yield’20e. BUY, T.P. Under Revision.