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MAPFRE: 1Q’21 RESULTS (ANÁLISIS BANCO SABADELL)

1Q'21 vs 1Q'20 Results
Premiums: € 5.896 Bn (-3.3% vs. -3.8% expected and -5.0% expected by the market consensus);
Operating Result: € 341.7 M;
EBT: € 308.1 M;
Net Profit: € 173.0 M (+36.4% vs. +31.9% expected and +35.8% expected by the market consensus);

The group has reported € 173.3 M of Net Profit, slightly above expectations, meaning a +36.7% increase vs. 1Q’20 (vs. +32% BS(e) and +36% consensus). The improvement is mainly explained by the nil impact from disasters (vs. € 54 M in 1Q’20 due to the earthquake in Puerto Rico), which is partially offset by lower capital gains generated (€ 10 M in 1Q’21 vs. € 38 M in 1Q’20). Both factors were already expected, and excluding them, the underlying Net Profit would have improve by +14.7%, meaning a 8.7% underlying ROE, slightly above the guidance’21 (~8.5%).
In terms of balance sheet, the solvency ratio’20 of 193% already includes Mapfre Vida’s internal model (pending approval in Dec’20), already standing at robust levels. Good operating performance and figures in line with expectations, which would allow the group to meet the guidance’21. We expect a positive share price reaction (conference call at 13:30 CET).
We cut our Net profit estimates by 1.2% in 2021 and by -3% in 2022 due minor adjustments in premiums and financial results that offset each other, now forecasting a +13.6% CAGR’20-23 in Net Profit (vs. +14.6% previously) and an average ROE over the period of ~8.5% (and vs. 6.5% on average in 2018-2020). On another note, MAP has kept its dividend commitment, paying a € 0.125/sh. DPS’20, +20% above our expectations. Following the improvement in Solvency and Liquidity seen in the 1Q’21, we do not see risks in this regard and we raise our DPS’21 estimate by around +12% up to € 0.134/sh. (7.3% yield, +7% vs. DPS’20).
Our estimates cut and upward revision of DPS practically offset each other, and thus we keep our Dec’21 T.P. unchanged at € 2.17/sh., meaning +22% upside. We reiterate our BUY recommendation, as the clean-up efforts made since 2017 are providing results and the improvement of the underlying profitability has been clear in the last few quarters, seeing room for further consolidation over the coming quarters, in addition to its appeal through dividend. MAP share price has climbed +12% YtD (in line with the sector and +5% vs. Ibex), although it continues to trade at a discount of around -20% vs. peers (8.2x P/E’21 vs. ~10.5x), which we believe will be adjusted with the delivery of the improvement in profitability. BUY. Target Price: € 2.17/sh (upside 21.98%)