Analysis of companies that are news: AENA, CIE Automotive, Repsol, Red Eléctrica and Telefónica.

We offer you the analysis of some of the Spanish companies that are news today, AENA, CIE Automotive, Repsol, Red Eléctrica and Telefónica, conducted by the Bankinter Analysis Department (Bankinter’s Blog):

Recommendation: Neutral
Target price: 151.4 euros
Closing: 140 euros
Daily variation: + 0.76%

9M18 results show revenue slowdown and margins deterioration as expected
In the tight 3Q18:

Revenues: of 1,272 million euros (+ 4.1% vs. + 6.0% in 1H18).
EBITDA: of 910 million euros (+ 1.2% vs. + 6.9% in 1H18).
BNA: of 504 million euros (-0.1% vs. + 11.7% in 1H18).
Results in line with expectations, driven by an increase in traffic of + 5.4% to 216.8 M passengers, which represents a deceleration compared to + 9.2% achieved in 1Q18 and + 5.8% in 2Q18. Operating costs increased + 8.1%, affected by the revision of several subcontractors, which eroded the EBITDA margin to 70.5% vs. 72.5% in 3Q17. In cumulative terms it falls slightly from 62.9% to 62.5%. Net financial debt decreased to 6,565 million euros vs. 6,948 million euros at the end of 2017, reducing the ratio of DFN / EBITDA to 2.6x.

The results show the slowdown in passenger traffic growth that we anticipated. Since the double-digit growth seen in the first months of the year the pace has been slowing down. On the contrary, the costs in the period are affected by the renewal of several subcontracted services and they grow above the revenues eroding the margin. We already expected a slight deterioration of the margin as traffic growth slowed down. In summary, online results that will allow AENA to comply with the year’s guidelines.

See quote / trade with AENA shares in Bankinter

Recommendation: Neutral
Target price: 25.5 euros
Closing: 22.6 euros
Daily variation: -0.1%

We review recommendation to Neutral from Buy

The figures of CIE show again solid growth and higher than the market in all the geographies in which it operates. The EBITDA and EBIT margins are accelerated and the objectives of the 2016/2020 Strategic Plan are easily achievable. However, the scenario for the auto sector is really complicated at present. We are at a critical moment, of structural change and the risk fronts do nothing but accumulate: protectionism, control of emissions and punishment of diesel vehicles, the race towards electrification, shared mobility, autonomous driving, etc. … All this has led to multiple profit warnings from different manufacturers (Daimler, BMW or Audi) and component companies (Valeo).

In order to reflect this scenario, we raised the risk premium of our model substantially (up 7.7% from 6.2%). As a result, our target price drops to € 25.5 (from € 32.2 above). Potential + 10%. With this, we set a recommendation in Neutral from Buy. CIE is a company with fundamental strengths and excellent management. Its geographical diversification, multi-product approach and its ability to capture opportunities for inorganic growth will help it to better weather adversity in the market and justify that it continues to be our main preference within the sector. However, the timing does not accompany. We go through a time when the market does not discriminate as fundamental and the punishment of the sector is indiscriminate. If these circumstances improve, so would our assessment and the recommendation would be again in Buy.

We cut recommendation to Neutral from Buy, for timing not fundamentals:

The results of CIE continue to show significant operational strength. The main items of the income statement grow at high rates (revenues + 4%, EBITDA + 12%, EBIT + 18% and BNA + 19%), the EBITDA and EBIT margins accelerate (up to 17.5% from 16, 3% in 3Q’17 and up to 13.3% from 11.8%) approaching the objectives of the Strategic Plan 2016/2020 (higher than 18% and higher than 14% respectively), the company reiterates its guidance and grows more than the market in all the geographies in which it operates.

With these figures, CIE continues to be our main preference within the auto sector. However, the automotive market faces significant challenges and the market does not discriminate according to the fundamentals of the Companies. Specifically, as main risks:

The protectionism. The imposition of tariffs makes imports of vehicles and components asymmetrically more expensive between different geographies. This situation could be mitigated in the case of CIE with a reorganization between the production of different plants. However, it would be a slow process and not free of costs.
The continuous scrutiny of the authorities at the level.