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IBERIAN DAILY 09 SEPTEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: INDITEX, NATURGY, OHLA.

MARKETS YESTERDAY AND TODAY

Profit-taking continues
Fears that an early withdrawal of monetary stimulus will come earlier than expected led to drops of more than -1.0% on European stock markets. Thus, in the Euro STOXX only Household Goods and Telecoms closed with gains, and Autos and Industrials saw the biggest drops. On the macro side, in the euro zone the ECB is expected to announce a cut to the PEPP to € 70-60 Bn/month in 4Q’21 (vs. the current € 80 Bn) along with an increase to growth prospects. In the US the Fed’s Beige Book for July-August showed an economy growing at a more moderate pace due to the impact from the Delta variant, and with prices rising due to distortions in the supply chain. Separately, Kaplan and Williams made statements that left the door open to tapering being announced this month and beginning in October. In China, August’s inflation slowed unexpectedly to 0.8%. On another note, the Govt. will monitor videogame companies more closely, leading to drops in companies like Tencent and Netea.
What we expect for today
European stock markets would see a bearish opening, awaiting C. Lagarde’s speech, which will mark the session. Currently, S&P futures are down -0.35% (the S&P 500 ended up +0.33% vs. vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 17.96). Asian markets are falling (China’s CSI -0.6% and Japan’s Nikkei -0.7%).
Today the ECB will hold its meeting. Also we will learn in the US the weekly jobless claims, and in Mexico August’s inflation data. In debt auctions: Ireland (€ 1.25 Bn in bonds due 2031 and 2041) and Italy (€ 7 Bn in 12M T-bills).


COMPANY NEWS

INDITEX. We expect good 2Q’21 results, but this would already be priced in. SELL.
ITX will release its 2Q’21 results on 15 September. We expect revenues to rebound strongly vs. 2020, even improving vs. 2019: +50% in sales vs. 2Q’20 and +3% vs. 2Q’19. Operating leverage and the measures adopted in the last year to reduce costs (especially rental costs) should lead EBIT to grow by +289% vs. 2Q’20 and +14% vs. 2Q’19. Trading at a P/E of 25x on a 12-month horizon compared to the (wide) historical range of 15x-35x , we think the current share price is fairly value, already including a rally in the results, and we do not see upside from current levels. Since 2020 lows the stock has risen +40% (+3% vs. IBEX).

IBEX 35 Technical Advisory Committee meeting. As expected, no changes were made.
The IBEX Technical Advisory Committee yesterday decided to keep the composition unchanged at September’s follow-up meeting. The next meeting will be held in January’22 (ordinary meeting, where changes are usually made).