portugal / spain - caixabankcib.com · 37 indra 41 jerónimo martins ... store-sales have positive...

CoRe List 4th February 2019 (06:00)

Portugal / Spain

Seeking an exit

CONTENTS

1 INVESTMENT CASE

2 CORE LIST

3 SUMMARY OF RECOMMENDATIONS

5 GDP GROWTH - EXPECTATIONS

6 SPAIN: ECONOMIC EVOLUTION

9 PORTUGAL: ECONOMIC EVOLUTION

12 SOVEREIGN DEBT

13 MARKET MONITOR

14 PRICE PERFORMANCE: LAST 3 MONTHS; 12M

COMPANY NOTES

17 ACS

21 Faes

25 Ferrovial

29 Iberdrola

33 Inditex

37 Indra

41 Jerónimo Mart ins

45 Liberbank

49 Repsol

53 Vidrala

1

Equity Research CoRe List February 2019

Investment Case

With elections in May, the potential rise of populist movements’ representation in the European parliament may (yet again) shake the foundations of the Union. Meanwhile, in the UK, Theresa May has failed to attain the parliament’s approval of a Brexit deal which, combined with the toughening of the EU representatives willingness to renegotiate an agreement, maintain the door to instability. In Spain, the government has yet to secure enough support to approve a budget for 2019. In Portugal, general elections should take place by October with the main doubt residing on whether the currently ruling Socialist Party will be able to secure an absolute majority. In the US, the stalemate on the border wall has led to a record breaking government shutdown which is said to shed 0.2pps out of the country’s GDP and the current agreement only addresses expenditures until February 15th. Meanwhile, Sino-American trade war continues, posing risks for the economy. The preliminary data released by Eurostat confirmed a slowdown in the Eurozone, with GDP growth reaching 1.2% yoy (+0.2% qoq), down from 1.6% in Q3, supported by Spain and France while Italian GDP contracted in the quarter. According to a first estimate, GDP grew by 1.8% in the euro area in 2018. In Spain, GDP expanded 2.4% yoy in 4Q (+0.7% qoq), in line with the previous quarter. For 2019, GDP growth estimates for Spain stand at 2.1-2.2%. In Portugal, GDP was up 2.1% in 3Q (+0.3% qoq). For 2019, GDP growth estimates for Portugal stand at 1.8-2.2%. Amidst this backdrop, we continue to see investment opportunities in Iberia, with the Core List being a selection of our strongest risk-adjusted recommendations: (1) ACS: a global construction group with sound earnings Outlook, dividend upside and expected net cash position by YE19F post Abertis acquisition which softens ACS cyclical

nature (Concessions representing 45% of consolidated prop. EBITDA); (2) Faes (New Entry): Bilastine expansion and mature products recycling drives solid earnings momentum which the market seems underestimating, considering the valuation discount

to peers and historical multiples; (3) Ferrovial: an infrastructure group trading at significant gap to FV (upside risk in Concessions) with expected weak earnings momentum already priced-in and potential value

unveiling through asset rotation (sale process of Service unit ongoing); (4) Iberdola: Trades at a discount to peers despite offering robust growth, limited volatility, attractive dividends and growing exposure to markets with attractive fundamentals

(US/Brazil). Increased visibility from upcoming CMD and S/T tailwinds (FX/power prices) should help close the performance gap to peers; (5) Inditex: the world largest apparel retailer that has been growing faster than pure online players (in comparable channels). Store-sales have positive LfL contribution and FX has

recently turned from headwind to tailwind; (6) Indra: a technology and IT company which should enjoy revenue growth acceleration and a bulky CF generation business that continues to be the cornerstone of the investment

case; (7) Jerónimo Martins: the co’s Polish operation continues to outperform the market which is expected to maintain growth patterns in 2019. Colombia should be an important driver in

2019-20; (8) Liberbank: an M&A story that seems to be close to unfold, through a financially and strategically sound merger, while trading at a discount to peers and the sector; (9) Repsol (new entry): a quality dividend play (6.6% DY20F, fully funded under a $50/bbl scenario), at cheap multiples, with upside potential from the IMO implementation and

efficiency/digitalization savings; (10) Vidrala (new entry): faces a strong underlying earnings outlook with solid demand and rising prices, which should more than offset some energy costs inflation. CF should

accelerate, leaving room for potential new M&A moves. Kind Regards,

CaixaBank BPI Equity Research Team

2


CoRe List

50

150

250

350

450

May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16 May-17 Mar-18 Jan-19

MSCI Small Caps Portfolio IBEX

Eurostoxx 600 PSI20 Stoxx Europe Mid 200IS

CoRe List

FY19

Entry date Entry Price Price (1) Performance Price

Target Mcap

(€ mn) Free float PE EV/EBITDA FCF Yield DY ND/EBITDA

Acerinox (out) 1-Aug-18 12.37 9.36 -24.3% 12.50 2584 65% 12.3x 7.1x 6.1% 4.8% 1.1x

ACS 10-Apr-18 31.81 36.22 13.9% 42.70 11397 87% 12.2x 6.1x 14.4% 5.2% -0.3x

Ferrovial 13-Jun-18 17.83 19.30 8.2% 22.00 14138 61% n.s. 16.8x 3.8% 4.1% 4.1x

Iberdrola 27-Nov-17 6.09 7.11 16.8% 8.50 44354 89% 14.4x 8.7x 2.9% 4.8% 3.7x

Inditex 15-Feb-18 25.65 24.11 -6.0% 31.70 75142 34% 19.4x 11.2x 6.2% 3.3% -1.3x

Jerónimo Martins 13-Jun-18 13.35 12.45 -6.7% 15.75 7835 39% 17.6x 8.6x 7.2% 5.1% 0.3x

MásMóvil (out) 13-Sep-18 19.74 18.38 -6.9% 32.60 2974 0% 25.6x 8.8x 1.4% 0.0% 1.9x

Indra 27-Nov-18 8.72 8.98 2.9% 12.40 1585 71% 10.3x 7.1x 7.0% 4.0% 1.3x

Nos (out) 13-Jun-18 4.73 5.66 19.6% 6.35 2913 48% 15.5x 6.3x 5.2% 5.9% 1.8x

Liberbank 27-Nov-17 0.47 0.44 -6.5% 0.70 1341 46% 8.0x n.s. n.s. 1.7% n.s.

Vidrala (in) 4-Feb-19 - 79.40 - 114.00 1969 44% 15.9x 9.3x 5.6% 1.3% 1.2x

Faes (in) 4-Feb-19 - 3.25 - 3.95 866 98% 15.6x 10.4x 5.9% 1.3% -0.9x

Repsol (in) 4-Feb-19 - 15.13 - 18.90 23578 83% 8.8x 3.7x 6.0% 6.3% 0.5x

(1) As of 30 January. Source: CaixaBank BPI Equity Research.

CoRe List: Performance vs. Benchmarks

Source: Bloomberg and BPI Equity Research.

CoRe List: Performance vs. Benchmarks

3M 6M YTD

CoRe List 4% -4% 7%

PSI 20 2% -9% 8%

IBEX 35 3% 3% 6%

MSCI SC 0% -12% 8%

Stoxx Europe Mid 200 1% -10% 8%

Stoxx 600 1% -8% 6%

Source: Bloomberg, CaixaBank BPI Equity Research.

3


Summary of Recommendations - I

Mkt Cap YE19 Risk Free Shares EV/ FCF ADV 6M

(€ mn) Target Rating Float % (mn) P/E EBITDA Yield DY 18F 19F EBITDA(6) EPS L6M L12M €' mn

Financials

Banco Sabadell 5787 1.55 1.03 51% Buy Medium 97% 5627 6.7 n.s. n.s. 6.2% n.s. n.s. -3% 7% -25% -44% 53.1

Banco Santander 68177 5.85 4.20 39% Buy Medium 100% 16237 8.3 n.s. n.s. 5.5% n.s. n.s. 5% 7% -10% -26% 464.0

Bankia 7913 2.70 2.57 5% Underperform Medium 39% 3085 11.6 n.s. n.s. 6.8% n.s. n.s. 2% -1% -23% -35% 40.9

Bankinter 6269 8.00 6.97 15% Buy Low 72% 899 9.9 n.s. n.s. 4.5% n.s. n.s. 6% 7% -14% -22% 30.9

BBVA 35060 6.60 5.26 26% Buy Medium 100% 6668 8.5 n.s. n.s. 5.2% n.s. n.s. -1% 0% -14% -27% 316.0

BCP 3686 0.34 0.24 39% Buy High 57% 15114 7.4 n.s. n.s. 0.0% n.s. n.s. 6% 35% -8% -25% 11.1

BME 2207 24.50 26.40 -7% Underperform Medium 88% 84 16.3 10.4 6.9% 6.7% -1.5 -1.4 -2% -2% -2% 4% 4.6

Liberbank 1341 0.70 0.44 60% Buy High 46% 3067 8.0 n.s. n.s. 1.7% n.s. n.s. 14% n.s. -12% -4% 2.7

Mapfre 7640 2.75 2.48 11% Neutral Medium 32% 3080 8.8 n.s. n.s. 5.8% n.s. n.s. 7% 11% -5% -8% 18.3

Unicaja 1683 1.70 1.05 63% Buy Medium 50% 1610 10.9 n.s. n.s. 2.0% n.s. n.s. 4% 7% -28% -104% 3.5

Capital Goods & Industrials

Acerinox 2584 12.50 9.36 34% Buy High 65% 276 12.3 7.1 6.1% 4.8% 1.3 1.1 3% 3% -24% -20% 19.8

Altri 1469 8.45 7.16 18% Neutral High 34% 205 7.2 5.2 13.2% 4.2% 1.4 0.9 8% 9% -19% 55% 3.5

CAF 1337 53.00 39.00 36% Buy High 60% 34 17.1 8.0 8.3% 2.1% 2.0 1.4 14% 32% 2% 7% 2.0

Cie Automotive 3065 27.00 23.76 14% Neutral High 48% 129 10.9 7.9 -8.4% 3.0% 1.7 2.3 9% 12% -8% 0% 15.2

Corticeira Amorim 1290 11.00 9.70 13% Neutral Medium 25% 133 20.2 11.7 3.6% 2.8% 0.8 0.8 6% 4% -14% -3% 1.2

Ence 1657 8.20 6.73 22% Buy High 74% 246 10.0 6.2 10.0% 3.7% 1.2 1.4 9% 7% -17% 34% 10.9

Europac 1667 16.80 16.80 0% Accept the bid High 60% 99 13.7 8.2 9.7% 2.9% 1.0 0.5 -1% -3% 1% 38% 4.4

Fluidra 1112 16.00 9.87 62% Buy Medium 50% 113 19.2 10.6 3.0% 0.0% 12.0 2.7 32% 27% -18% -9% 2.9

Gestamp 2935 7.20 5.10 41% Neutral High 30% 576 9.2 6.1 1.5% 3.3% 2.3 2.2 8% 12% -21% -15% 5.4

Semapa 1219 24.80 15.00 65% Buy High 29% 81 7.1 5.0 13.0% 3.7% 2.8 2.0 9% 15% -27% -16% 1.3

Sonae Capital 218 1.25 0.87 43% Buy High 37% 250 n.s. 12.2 9.1% 0.0% 6.3 4.2 19% n.s. -4% -10% 0.3

Sonae Indústria 70 UR 1.54 - Under Revision High 31% 45 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. -40% -62% 0.1

Talgo 744 6.40 5.45 17% Buy High 46% 137 16.5 8.1 9.0% 0.0% -0.7 -0.6 8% 14% 18% 17% 1.8

The Navigator Company 3085 5.25 4.30 22% Buy Medium 31% 718 10.5 6.9 10.6% 6.5% 1.4 1.0 7% 6% -13% -1% 5.5

Tubacex 380 3.70 2.86 30% Neutral High 89% 133 n.a. 13.5 1.9% 0.0% 3.3 4.5 44% n.s. -6% -16% 1.3

Tubos Reunidos 47 0.23 0.27 -16% Underperform High 49% 175 n.s. 13.9 -1.9% 0.0% 12.0 10.7 47% n.s. -43% -67% 0.4

Vidrala 1969 114.00 79.40 44% Buy Medium 44% 25 15.9 9.3 5.6% 1.3% 1.8 1.2 10% 14% 3% 1% 1.8

Zardoya Otis 3199 7.20 6.80 6% Buy Low 38% 471 20.6 14.6 5.1% 4.4% -0.2 -0.3 4% 4% -15% -22% 4.9

Consumer Cyclicals

Amadeus 27157 67.40 63.24 7% Underperform Medium 100% 429 22.4 13.2 4.1% 1.9% 1.4 1.0 10% 8% -15% 4% 214.4

eDreams ODIGEO 304 5.50 2.80 97% Buy High 52% 109 4.8 3.9 16.3% 0.0% 1.8 1.1 5% 40% -26% -47% 0.8

IAG 14821 11.40 7.44 53% Buy High 100% 1992 5.9 4.3(3) 15.0% 4.5% 1.3(4) 1.0(4) 6%(5) 9% -2% 7% 40.8

Inditex 75142 31.70 24.11 34% Buy Low 34% 3117 19.4 11.2 6.2% 3.3% -1.2 -1.3 7% 8% -13% -14% 273.6

Melia Hotels 2014 15.40 8.77 76% Buy High 48% 230 14.8 6.5(3) 5.2% 1.8% 2.1 1.8 5% 8% -20% -22% 11.7

NH Hotel Group - - 4.44 - Under Revision n.s. 48% - n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. -30% -26% 18.4

Prosegur 2812 5.80 4.70 23% Neutral High 50% 598 16.8 8.1 4.2% 2.3% 0.8 0.6 3% 11% -16% -28% 4.5

Consumer Staples

Barón de Ley 446 115.50 109.00 6% Neutral Low 34% 4 17.9 8.8 4.7% 0.0% -4.9 -5.4 5% 13% -2% 0% 1.0

Deoleo 118 0.10 0.08 19% Underperform High 30% 1405 407.8 17.8 5.2% 0.0% 31.9 14.6 21% n.s. -48% -54% 0.1

DIA 273 - 0.44 - Under Revision n.s. 75% 622 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. -79% -89% 20.2

Ebro Foods 2768 20.70 17.99 15% Neutral Low 44% 154 15.7 10.2 4.1% 3.1% 2.4 2.0 3% 0% -2% -6% 5.8

Ibersol - - 8.46 - Under Revision n.s. 45% - n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. -17% -15% 0.1

Jerónimo Martins 7835 15.75 12.45 27% Buy Medium 39% 629 17.6 8.6 7.2% 5.1% 0.1 0.3 7% 8% -2% -25% 22.1

Sonae 1815 1.20 0.91 32% Buy High 47% 2000 8.8 4.0 12.0% 4.9% 4.4 3.8 6% 5% -7% -27% 4.3

Telepizza 610 6.90 6.06 14% Buy Medium 74% 101 18.6 9.5 -1.0% 1.0% 2.5 1.9 10% 12% 11% 23% 2.4

Viscofan 2261 52.75 48.52 9% Neutral Low 89% 47 19.6 11.6 5.1% 3.2% 0.3 0.1 4% 3% -19% -11% 11.2

Price Performance

FY19F Net Debt/

17-21F CAGRCompany Price(1) Upside(2) Recom.

EBITDA

4


Summary of Recommendations - II

Mkt Cap YE19 Risk Free Shares EV/ FCF ADV 6M

(€ mn) Target Rating Float % (mn) P/E EBITDA Yield DY 18F 19F EBITDA(6) EPS L6M L12M €' mn

Healthcare

Almirall 2570 15.10 14.78 2% Underperform Medium 33% 174 19.0 10.7 4.2% 1.6% 2.1 1.3 24% n.s. 24% 71% 10.6

Faes 866 3.95 3.25 21% Buy Medium 98% 275 15.6 10.4 5.9% 1.3% -0.5 -0.9 18% 18% -11% 16% 1.5

Grifols 14056 30.10 23.01 31% Buy Medium 69% 683 18.7 13.8 4.5% 2.1% 4.4 3.7 7% 9% -10% -10% 46.8

Rovi 1052 16.50 19.00 -13% Underperform Medium 28% 55 45.0 24.6 -0.2% 0.8% -2.3 -1.4 29% 35% 18% 21% 1.1

Infrastructures & Engineering

ACS 11397 42.70 36.22 18% Buy Medium 87% 315 12.2 6.1 14.4% 5.2% 0.1 -0.3 2% 8% -3% 17% 53.8

Aedas Homes 1114 37.50 23.22 61% Buy High 48% 48 20.2 13.9 -15.2% 0.0% n.s. 3.4 n.s. n.s. -23% -26% 2.4

Aena 22313 150.00 148.75 1% Neutral Low 41% 150 17.0 11.3 5.5% 4.5% 2.6 2.4 1% 2% -4% -11% 65.1

Applus+ 1415 14.70 9.90 49% Buy Medium 100% 143 13.2 8.2 6.5% 1.3% 2.1 1.6 10% 10% -20% -14% 9.1

CTT 468 4.50 3.12 44% Buy Medium 100% 150 11.9 3.7 n.s. 3.1% -1.5 -0.2 8% 11% 2% 1% 2.4

Duro Felguera 75 UR 0.02 - Under Revision n.s. 75% 4800 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. -90% -67% 0.9

FCC 4849 13.00 12.80 2% Underperform Medium 13% 379 15.8 7.7 6.0% 0.0% 2.8 2.3 6% 33% 18% 36% 1.9

Ferrovial 14138 22.00 19.30 14% Buy Medium 61% 733 n.s. 16.8 3.8% 4.1% 6.1 4.1 4% 10% 10% 10% 58.7

Inmobiliaria Colonial 4578 10.25 9.01 14% Buy Low 80% 508 32.7 32.5 2.0% 2.7% 16.0 14.3 12% 15% -3% 4% 14.7

Logista 3008 23.70 22.66 5% Neutral Low 50% 133 14.8 10.1 5.3% 5.0% -0.1 -0.2 6% 3% 7% 23% 12.3

Merlin Properties 5515 13.00 11.74 11% Buy Low 78% 470 18.4 23.7 2.2% 4.3% 14.2 13.3 7% 12% -5% 6% 24.5

Metrovacesa 1620 14.90 10.68 40% Neutral High 30% 152 n.s. 65.7 -17.8% 0.0% 4.9 13.5 n.s. n.s. -20% na 2.6

Mota Engil 463 3.10 1.95 59% Buy High 34% 238 n.s. 4.3 9.7% 0.9% 3.6 3.1 4% n.s. -32% -51% 2.3

Neinor Homes 986 20.00 12.48 60% Buy High 71% 79 8.3 9.4 -19.5% 0.0% 9.3 4.6 n.s. n.s. -22% -32% 4.7

OHL 222 - 0.77 - Under Revision n.s. 47% 287 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. -74% -83% 5.5

Sacyr 1141 2.80 2.10 33% Buy High 57% 544 4.80 10.0 8.5% 4.9% 8.4 9.0 10% 22% -21% -16% 7.4

Tecnicas Reunidas 1244 28.00 22.26 26% Neutral High 63% 56 19.1 8.3 11.7% 4.0% -2.5 -2.1 7% 22% -23% -19% 8.1

Oil & Gas

Galp 11191 17.10 13.50 27% Neutral Medium 60% 829 11.7 4.8 6.2% 4.1% 0.7 0.4 15% 15% -21% -10% 41.9

Repsol 23578 18.90 15.13 25% Buy Medium 83% 1559 8.8 3.7 6.0% 6.3% 0.5 0.5 8% 5% -8% 6% 207.1

TMTs

AtresMedia 963 6.25 4.27 46% Buy High 30% 226 7.1 5.8 11.6% 14.1% 1.2 1.3 -2% -2% -34% -46% 5.3

Cellnex 5570 25.50 24.04 6% Neutral Low 43% 232 74.3 20.8 4.3% 0.4% 5.7 5.3 11% 23% 4% 12% 28.1

Cofina 59 0.77 0.58 33% Underperform High 26% 103 8.3 8.1 7.4% 0.0% 2.6 2.5 0% 11% -5% 22% 0.1

Euskaltel 1433 8.45 8.02 5% Neutral Medium 0% 179 18.5 8.4 5.8% 4.2% 4.6 4.4 3% 13% 1% 15% 3.8

Impresa 31 0.22 0.19 20% Neutral High 31% 168 4.5 9.9 6.1% 0.0% 8.7 8.1 3% n.s. -17% -45% 0.0

Indra 1585 12.40 8.98 44% Buy Medium 71% 177 10.3 7.1 7.0% 4.0% 1.7 1.3 8% 11% -14% -25% 9.9

MásMóvil 2974 32.60 18.38 77% Buy Medium 0% 32 25.6 8.8 1.4% 0.0% 2.5 1.9 24% n.s. -7% -10% 12.7

Mediaset España 2016 7.90 6.16 28% Buy High 42% 327 10.3 9.1 6.6% 10.1% -0.5 -0.6 0% 0% -9% -28% 13.7

Nos 2913 6.35 5.66 12% Buy Medium 48% 515 15.5 6.3 5.2% 5.9% 1.8 1.8 3% 12% 14% 10% 4.9

Novabase 69 2.75 2.21 25% Neutral High 27% 31 26.0 4.3 8.0% 1.2% -5.7 -5.4 -2% -6% -18% -25% 0.0

Prisa 966 1.10 1.73 -37% Underperform High 18% 558 13.9 6.3 6.4% 2.9% 4.0 3.3 10% n.s. -1% 8% 1.1

Telefonica 39367 8.30 7.58 10% Neutral Medium 90% 5192 10.1 6.2 5.7% 5.3% 2.6 2.7 -1% 0% 1% -4% 282.1

Vocento 137 1.55 1.12 38% Neutral High 46% 121 7.7 5.4 16.2% 0.0% 0.9 0.5 -4% 71% -15% -22% 0.0

Utilities

Acciona 4688 96.50 81.88 18% Neutral High 46% 57 15.9 6.8 0.8% 4.0% 3.5 3.7 2% 10% 10% 18% 15.4

EDP 11536 3.55 3.16 13% Neutral Medium 35% 3657 13.0 8.2 3.2% 6.0% 4.1 3.8 -1% 4% -11% 18% 28.6

EDP Renováveis 6848 9.70 7.85 24% Buy Medium 14% 872 27.2 8.8 -1.0% 0.8% 3.3 3.5 4% 3% -10% 12% 1.7

Enagas 6059 24.50 25.38 -3% Underperform Medium 95% 239 13.4 9.6 5.3% 6.2% 4.2 4.0 0% -1% 10% 25% 46.7

Endesa 22816 24.20 21.55 12% Buy Medium 30% 1059 14.9 7.5 3.9% 6.2% 1.6 1.8 3% 4% 13% 28% 59.0

Siemens Gamesa 8480 14.40 12.45 16% Neutral Medium 33% 681 14.7 5.7 13.0% 0.8% -0.7 -0.2 2% 2% 5% -2% 42.8

Naturgy 24037 24.10 24.02 0% Neutral Medium 32% 1001 16.0 8.6 4.0% 5.4% 3.2 3.1 5% 14% 6% 38% 65.5

Iberdrola 44354 8.50 7.11 20% Buy Medium 89% 6240 14.4 8.7 2.9% 4.8% 3.6 3.7 10% 6% 10% 14% 214.1

REE 10838 19.35 20.03 -3% Underperform Medium 80% 541 15.0 9.6 4.7% 4.9% 3.2 3.2 1% 3% 12% 24% 57.7

REN 1745 2.85 2.62 9% Buy Medium 38% 667 13.7 8.8 6.4% 6.5% 5.6 5.6 0% -5% 4% 10% 2.5

Solarpack 406 12.70 12.68 0% Neutral Medium 42% 32 21.4 10.5 -37.7% 0.0% 1.0 4.3 100% -39% n.a. n.a. 0.7

(1) as of 30 Jan; (2) Non-annualized values; (3) Adj. EV/EBITDAR; (4) Adj. Net Debt/EBITDAR; (5) EBITDAR; (6) pre-provision profit for banks and Net technical and financial result for Mapfre

Company Price(1) Upside(2) Recom.EBITDA Price Performance

FY19F Net Debt/

17-21F CAGR

5


GDP Growth - expectations

Spanish Economic Outlook

2017 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020

GDP (%) 3.0 2.5 2.1 2.0 2.6 2.2 2.0 2.6 2.2 1.9 2.6 2.2 - 2.5 2.2 1.9 2.5 2.2 1.9

Private consumption 2.5 2.4 2.0 1.9 2.3 1.8 1.4 2.4 1.8 1.5 2.3 1.7 - - - - 2.4 1.9 1.5

Public consumption 1.9 2.0 1.5 1.2 1.9 1.7 1.5 2.1 1.6 1.3 1.9 1.4 - - - - 2.1 1.6 1.2

Investment 4.8 5.5 3.7 2.8 5.4 3.9 3.3 6.1 3.8 3.8 5.7 4.4 - - - - 6.2 4.7 3.6

Exports 5.2 2.0 3.1 4.0 2.6 3.3 3.4 1.6 2.8 4.0 2.4 2.8 - 2.1 3.7 4.1 1.8 3.4 4.0

Imports 5.6 3.6 3.5 4.1 3.5 3.5 3.2 3.5 2.9 4.1 3.5 3.1 - 2.6 3.2 3.6 3.8 4.1 4.1

Public deficit, % of GDP 3.1 2.7 2.0 1.4 2.7 2.1 1.9 2.7 1.8 1.2 -2.7 -1.8 - 2.7 2.3 2.4 2.7 2.4 2.0

Public debt, % of GDP 98.1 97.0 95.9 94.2 96.9 96.2 95.4 97.7 96.5 96.0 96.9 95.4 - 97.2 95.8 94.6 - - -

Current account, % of GDP 1.8 0.9 0.6 0.6 1.2 1.0 1.1 1.0 1.0 1.0 1.1 1.0 - 1.2 1.2 1.3 1.0 0.8 0.7

Inflation rate (in %; average) 2.0 1.7 1.6 1.7 1.8 1.7 1.5 1.9 1.9 1.7 - - - 1.8 1.8 1.7 1.8 1.6 1.6

Unemployment Rate (%) 17.2 15.3 13.8 12.5 15.6 14.4 13.3 15.3 13.8 12.5 15.5 14 - 15.6 14.7 14.3 15.3 14.3 13.3

Source: Ministry of Finance, BoS, IMF, EC, OECD, CaixaBank and BPI Macro Research.

Portuguese Economic Outlook

2017 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020

GDP (%) 3.0 2.5 1.8 1.7 2.2 1.8 1.7 2.2 1.8 1.7 2.3 2.2 2.3 2.3 1.8 1.5 2.1 1.8 1.7

Private consumption 2.3 2.3 1.8 1.8 2.3 2.0 1.8 2.3 2.0 1.8 2.3 1.9 2.0 1.9 1.6 1.3 2.3 2.0 1.8

Public consumption 0.2 0.7 0.8 0.3 0.9 0.7 0.5 0.9 0.7 0.5 1.0 0.2 -0.1 1.9 1.0 1.1 0.7 0.1 0.0

Investment 9.2 4.2 3.7 4.4 4.4 4.7 5.1 4.4 4.7 5.1 5.2 7.0 7.1 7.6 6.3 5.0 3.9 6.6 5.9

Exports 7.8 3.9 4.1 3.2 5.5 4.3 3.6 5.5 4.3 3.6 6.6 4.6 4.2 6.2 4.7 4.2 3.6 3.7 4.0

Imports 8.1 4.9 2.2 3.6 6.0 5.2 4.4 6.0 5.2 4.4 6.9 4.8 4.5 6.8 5.5 4.9 4.1 4.7 4.9

Public deficit, % of GDP 3 0.71 0.7 0.5 0.7 0.6 0.2 -0.7 -0.6 -0.2 0.7 0.2 -0.7 0.7 0.3 0.2 - - -

Public debt, % of GDP 124.8 121.7 119.4 118.1 121.5 119.2 116.8 121.5 119.2 116.8 121.2 118.5 114.9 120.8 117.2 115.1 - - -

Current account, % of GDP 0.5 -0.3 -0.2 -0.2 0.9 0.8 0.8 - - - -1.0 -1.2 -1.8 -1.0 -0.8 -0.3 - - -

Inflation rate (in %; average) 1.6 1.2 1.3 1.5 1.5 1.6 1.6 1.5 1.6 1.6 1.3 1.3 1.4 1.7 1.6 1.8 1.4 1.4 1.5

Unemployment Rate (%) 8.9 7.0 6.5 6.2 7.1 6.3 5.9 7.1 6.3 5.9 6.9 6.3 6.8 7.0 6.7 6.5 7.0 6.2 5.5

Source: Ministry of Finance, BoP, IMF, EC, OECD, CaixaBank and BPI Macro Research.

BoS (Dec-18)

BPI (Jan-19) EC (Nov-18) OECD (Nov-18) Gov. (Oct-18) IMF (Oct-18) BdP Dec-18)

BPI - CaixaBank (Jan-19) EC (Nov-18) OECD (Nov-18) Gov. (Jan-19) IMF (Oct-18)

6


Spain: Economic Evolution (I)

-4.0

-2.0

0.0

2.0

4.0

6.0

2013 2014 2015 2016 2017 2018 2019

Spain Forecast Spain Euro Area Forecast Euro Area

ForecastsGDP growth% yoy change

0.0

8.0

16.0

24.0

32.0

2013 2014 2015 2016 2017 2018 2019

Spain Forecast (Spain) Euro Area Forecast (Eurozone)

Forecasts

Unemployment rate% of active population

Economic growth remains above the Euro Area average

Source: INE and CaixaBank Research forecasts.

Labor market conditions continue to improve

Source: INE and CaixaBank Research forecasts.

- The Spanish economy ended the year expanding more robustly than anticipated.

GDP grew +2.4% YoY in 4Q18 (similar to 3Q) or +0.7% QoQ, far outstripping the growth in

Eurozone (+0.2% QoQ). In YoY terms, domestic demand contributed 2.7 pp, down 0.1 pp

compared to 3Q, offset by a smaller negative contribution from foreign demand (-0.3 pp vs.

-0.4 pp in 3Q). However, this decline was offset by a less negative impact on growth had

by net foreign demand (-0.3 p.p. compared to -0.4 p.p. in 3Q)., a positive figure amid trade

tensions and the Eurozone slowdown. The good trend from private consumption continued

in 4Q (0.5% growth QoQ and 2.2% YoY), in line with a positive labour market performance.

- Growth should continue to exceed that of the Eurozone in 2019 and 2020 thanks to a

sustained positive trend from domestic demand (+2.2%/+1.9%), albeit losing traction

compared to recent years. We expect the foreign sector to benefit from falling oil prices,

having a near neutral impact on growth (-0.1%/0.0%).

- The Spanish public debt spread showed resilience during the worst of the Italian

crisis, helping to keep the cost of debt under control. The three major agencies upgraded

their ratings in 1H18 (S&P and Fitch: A-, Moody’s: Baa1), while we would not rule out S&P

(rating with positive outlook) lifting its rating to A during 2019. However, political uncertainty

may delay the rating upgrade to 2020.

- Employment creation remains solid. The number of employed individuals increased by

3% in 4Q 2018 (2.6% in 4Q 2017), while the unemployment rate fell to 14.4% in 4Q 2018

(the lowest level since 4Q 2008). We expect employment to expand further (1.9% in 2019

and 1.6% in 2020), with the unemployment rate declining (to 13.8% in 2019 and 12.5% in

2020), albeit at a more moderate pace than in previous years.

7


Spain: Economic Evolution (II)

90.0

95.0

100.0

105.0

110.0

115.0

Nov-13 Sep-14 Jul-15 May-16 Mar-17 Jan-18 Nov-18

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

GDP Growth (LHS) Economic Sentiment Index (RHS)

50

52

54

56

58

60

Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18

PMI manufacturing PMI services

GDP and Economic Sentiment Index

Source: CaixaBank Research, data based on INE and European Comission.

PMI indicator above the 50-level

Source: CaixaBank Research, based on data from Markit.

- Business sentiment indices held at comfortable levels in 4Q 2018. On the demand side,

retail sales were up by 1.7% year-on-year in 4Q 2018 (Oct.-Nov.), well above the 3Q 2018

figure (-0.2%). We expect private consumption to grow steadily in the following quarters,

albeit at a slightly slower pace.

- Activity indicators show a very gradual slowdown. On the supply side, the

manufacturing and services PMI indices stood at solid rates in 4Q 2018, at 51.8 and 54

points respectively, above the expansionary zone but at lower levels than at the beginning

of the year.

8


Spain: Economic Evolution (III)

-11.0-9.3 -9.3

-6.8 -6.6-5.8

-5.1-4.3

-3.1 -2.7-2.0

-12.5

-10.5

-8.5

-6.5

-4.5

-2.5

-0.5

1.5

9 10 11 12 13 14 15 16 17 18 19

Interests

Primary Balance (excluding financial aid)

ForecastsFiscal deficit% of GDP

20

40

60

80

100

120

2006 2008 2010 2012 2014 2016 2018 2020

Public Debt %PIB Public Debt %PIB Forecast

ForecastsPublic Debt% of GDP

Fiscal deficit has been steadily declining

Source: Ministry of Finance and Civil Service and CaixaBank Research forecasts.

Public Debt has stabilized around 100% of GDP

Source: Ministry of Finance and Civil Service and CaixaBank Research forecasts.

- The public deficit continued its declining trend. 2018 forecasts suggest the 2.7% target

will be met. The government has extended 2018 budgets to 2019, and it is not yet clear that

the Spanish Parliament will approve 2019 draft budgets. Our forecasts point to a deficit of

2%.

- The draft budgets were compiled assuming a deficit target of 1.3%, a more stringent level

than desired by the government (1.8%). However, Parliament rejected the government’s

deficit target proposal, and therefore the target approved under the Mariano Rajoy

government (1.3%) remains in place.

- We expect the public debt/deficit ratio to remain on a declining trend thanks to fiscal

consolidation and economic growth. In 3Q18 the figure stood at 98.3% (vs. 100.7% peak

level in 1Q16) and we anticipate a dip to 94.2% in 4Q20.

9


Portugal: Economic Evolution (I)

-12.0

-8.0

-4.0

0.0

4.0

8.0

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Exports Imports Domestic demand GDP

ForecastsGDP growth%

2

7

12

17

22

27

32

37

42

47

Nov-07 Sep-09 Jul-11 May-13 Mar-15 Jan-17 Nov-18

15-24 years old Total

6.6%

19.4%

Unemployment rate% of active population

The dilution of the past tailwinds and the decline of external demand justifies the expected deceleration

Source: Banco BPI Research, from Datastream data.

Unemployment is back to pre-crisis levels


- Economic growth remains robust, although leading activity indicators suggest some

slowdown. In particular, we would point to the Bank of Portugal coincident indicators for

global activity and private consumption, which suggest a deceleration. We forecast growth

of +1.8% in 2019 and +1.7% in 2020.

- However, there are negative risks on GDP growth in 4Q 2018 due to one-off factors.

Indeed, strikes at one of Portugal’s main ports last November had a significant impact on

exports (-9.3% YoY in November, while imports rose 8% YoY), having an uncertain (but

certainly negative) impact on GDP. In November the current account balance posted a

deficit of -0.5% of GDP (vs. -0.1% in October). We expect the figures to stabilise as the port

strike, which is linked to the automobile export sector, ended last December.

- The Portuguese 10y spread showed resilience amid the widening Italian spreads

seen in 2018 thanks to budgetary consolidation, domestic political stability and a

comfortable position in terms of Treasury financing requirements. Evidence of this is the

country fully repaying the IMF loans provided as part of the country’s bailout. Looking at

2019, 25% of the Treasury’s financing requirements have already been secured thanks to

a successful syndicated 10y placement in early January.

- The labour market again showed a very positive trend in November, despite

deceleration signals. In November, employment rose at a solid rate (+1.6% YoY seasonally

adjusted), the number of unemployed decreased significantly (-17.8% YoY) and the

unemployment rate stabilised at 6.6% for the third consecutive month. Given the expected

economic deceleration and the significant improvements seen in 2017/18, unemployment

is expected to decline further, but at a more gradual pace in the near future. With this in

mind, we continue to expect an unemployment rate at year-end 2018 of 7.0%, subsequently

declining to 6.5% in 2019.

10


Portugal: Economic Evolution (II)

-80

-60

-40

-20

0

20

40

70

80

90

100

110

120

Dec-03 Dec-06 Dec-09 Dec-12 Dec-15 Dec-18

Economic sentiment (LHS) Industry

Construction Services

Index

-6.0

-4.0

-2.0

0.0

2.0

4.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Coincident indicator Real GDP yoy

% GDP growth and coincident indicator

Confidence indicators remain strong


Coincident indicators suggest slower growth ahead


- Confidence indicators are slowing in all sectors, but remain close to historical highs,

in line with our scenario of GDP growth being sustained above the historical average,

narrowing the gap against average growth in the euro area. Consumer confidence

continues to perform well, which together with a robust labour market suggests that

household spending will remain solid. In the construction sector, confidence remains strong,

in line with more robust activity in the residential sector. Better expectations for the next 12

months linked to an anticipated boost in public investment (general elections are due in

October 2019) should also give a significant confidence lift to the sector.

- Other high-frequency indicators support the view that growth will remain solid in

2019, although short of the levels seen in 2017. Looking at the activity coincident

indicator, the deceleration is evident: during 2018 this indicator dropped to 1.7% in

December 2018 from 2.8% in December 2017. The indicator performance is coherent with

the fading of past tailwinds - low oil prices, low interest rates, strong external demand –

suggesting that the economy is moving into a more advanced phase of the economic cycle.

11


Portugal: Economic Evolution (III)

-12

-9

-6

-3

0

3

2011 2012 2013 2014 2015 2016 2017 2018 2019

Overall Balance Primary Balance

Fiscal balance% of GDP

Forecasts

40

55

70

85

100

115

130

145

Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20

% of GDP Forecasts

Fiscal deficit in line with official targets

Source: Banco BPI Research and INE Portugal.

Public debt has started to subside

Source: Banco BPI Research and INE Portugal.

- The public deficit continues to shrink. We expect the deficit to end 2018 at -0.7% of

GDP, a figure that compares well with both the -3% reported in 2017 (which included 2 pp

due to the recapitalisation of CGD) and -1% in adjusted terms.

- The public debt ratio stabilised at 125% of GDP in 3Q 2018 for the second consecutive

quarter, and is expected to decline to 121.7% of GDP at the end of the year, down 3.1 pp

compared to 2017. The structure of debt has improved, with the cost of outstanding debt

falling to 2.9% in 2018, from 3.1% in 2017; and the maturity profile has increased (average

maturity currently stands at 7.8 years). In 2019 the public debt ratio is expected to decline

to 119.4% of GDP.

12


Sovereign Debt

-4

0

4

8

12

16

20

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

OT 10Y Bund 10Y Bono 10y

%

0

400

800

1200

1600

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Portugal Spain

%

0

5

10

15

20

25

30

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

€ bn

0

50

100

150

200

250

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

€ bn

10Y Yields Evolution

Source: Banco BPI Research, Bloomberg.

Portuguese Public debt Maturity Profile

Source: Bloomberg.

10Y Spreads Evolution

Source: Bloomberg.

Spanish Public debt Maturity Profile

Source: Bloomberg.

13


Market Monitor

P/E 19F

Top 10

Bottom 10

Impresa 4.5 Cellnex 74.3

Sacyr 4.8 Rovi 45.0

eDreams ODIGEO 4.8 Inmobiliaria Colonial 32.7

IAG 5.9 EDP Renováveis 27.2

Banco Sabadell 6.7 Novabase 26.0

Semapa 7.1 MásMóvil 25.6

AtresMedia 7.1 Amadeus 22.4

Altri 7.2 Solarpack 21.4

BCP 7.4 Zardoya Otis 20.6

Vocento 7.7 Corticeira Amorim 20.2

Source: Bloomberg.

Dividend Yield 19F

Top 20

AtresMedia 14.1% EDP 6.0%

Mediaset España 10.1% Nos 5.9%

Bankia 6.8% Mapfre 5.8%

BME 6.7% Banco Santander 5.5%

REN 6.5% Naturgy 5.4%

The Navigator Company 6.5% Telefonica 5.3%

Repsol 6.3% BBVA 5.2%

Endesa 6.2% ACS 5.2%

Banco Sabadell 6.2% Jerónimo Martins 5.1%

Enagas 6.2% Logista 5.0%

Source: Bloomberg.

Top and Bottom upsides

Source: CaixaBank BPI Equity Research.

EV/EBITDA 19F

Top 10

Bottom 10

CTT 3.7 Metrovacesa 65.7

Repsol 3.7 Inmobiliaria Colonial 32.5

eDreams ODIGEO 3.9 Rovi 24.6

Sonae 4.0 Merlin Properties 23.7

Mota Engil 4.3 Cellnex 20.8

Novabase 4.3 Deoleo 17.8

IAG 4.3 Ferrovial 16.8

Galp 4.8 Zardoya Otis 14.6

Semapa 5.0 Tubos Reunidos 13.9

Altri 5.2 Aedas Homes 13.9

Upside per sector


FCF Yield 19F

Top 20

eDreams ODIGEO 16.3% The Navigator Co. 10.6%

Vocento 16.2% Ence 10.0%

IAG 15.0% Europac 9.7%

ACS 14.4% Mota Engil 9.7%

Altri 13.2% Sonae Capital 9.1%

Semapa 13.0% Talgo 9.0%

Siemens Gamesa 13.0% Sacyr 8.5%

Sonae 12.0% CAF 8.3%

Tecnicas Reunidas 11.7% Novabase 8.0%

AtresMedia 11.6% Cofina 7.4%

EDR 97%

MAS 77%

MEL 76% SEM

65%UNI 63%

PRS -37%

TRG -16%

ROVI-13%

BME -7%

ENG -3%

-50%

0%

50%

100%

150%

12%

12%

15%

21%

22%

25%

26%

26%

32%

44%

0% 20% 40% 60%

Healthcare

Utilities

Consumer Staples

Median

Capital Goods &Industrials

TMTs

Infra & Eng.

Oil & Gas

Financials

ConsumerCyclicals

14


Price Performance: Last 3 Months; 12M

Best and Worst Performances 3M

Source: Bloomberg.

-100% -50% 0% 50% 100%

Stoxx Europe 600 Healthcare

Almirall

Stoxx Europe 600 Basic Resources

Altri

Stoxx Europe 600 Utilities

Naturgy


Europac

Stoxx Europe 600 Construction &Materials

FCC

Stoxx Europe 600 Industrial Goods &Services

Sonae Indústria


Duro Felguera


Tubos Reunidos


OHL

Stoxx Europe 600 Retail

DIA

Best and Worst Performances 12M

Source: Bloomberg.

-100% -50% 0% 50%


Tubos Reunidos

Stoxx Europe 600 Food & Beverage

Telepizza


Duro Felguera

Stoxx Europe 600 Utilities

Siemens Gamesa


Talgo

Stoxx Europe 600 Travel & Leisure

NH Hotel Group

Stoxx Europe 600 Travel & Leisure

eDreams ODIGEO


Sonae Indústria


OHL

Stoxx Europe 600 Retail

DIA

Company Notes

This page is intentionally left blank.

INVESTMENT REPORT See important information on the last page of this document. See historical recommendation here.

EQUITY RESEARCH – IBERIA

an

ali

sis

.ca

ixa

ba

nk

.es

/ b

pie

qu

ity

.bp

i.p

t

Equity

Company Report

ACS CONSTRUCTION / Spain

04 Feb. 19 (06:00) (1)

(1) Time of the conclusion of the analysis, issue of recommendation and publication.

Changing CF profile

Concessions account for >45% of prop. EBITDA, enjoying a pause in interest rate escalation, while EM exposure (c40% prop. EBITDA) and USD should render tail winds. Abertis driving CF profile changes: HOT already announced that post

Abertis (ABE) deal will increase its payout from 50% to 65% while at ACS level the potential dividend increase still needs to be decided. We are now assuming a payout increase at ACS from 55% to 65% which would represent nearly 35% yoy increase to €1.87 DPS/5.2% DY19F (+14% underlying) implying +€150mn to shareholders and 50% of FCFE 19F. Such a payout seems consistent with a company flipping into a net cash position (€0.7bn) in FY19F. We estimate ABE SPV prop. dividend (30%) to account for about 20% of ACS FCFE and over 45% of consolidated prop. EBITDA. Orderbook visibility: Q3 topline accelerated to +11% yoy (vs. +2% in 1H)

and EBITDA +14% yoy (vs. +2% in 1H). Book-to-build of the construction unit at 1.18x and a historically high construction backlog fuels expectations of strong quarters ahead. We assume €0.9bn NP in FY18 (in line with guidance), +3.7% for FY19 F (possibly conservative reading from the orderbook) and +6% CAGR 18-21F. We do not rule out a more bullish guidance for FY19 to be announced in FY18 results. Seasonal WK recovery in Q4, partly offset by c€0.2bn of ABE-related tax retention, should allow ND to reach €0.25bn vs. Q3 pro-forma of €916mn (0.4x LTM EBITDA). YE19 Price Target set at €42.70 (-1% or -€0.4/sh): We have made slight

changes, standing out the aforementioned tax retention recoverable in FY19. Orderbook size, business mix and geographic diversification remain key factors driving competitive advantage. The stake in ABE softens ACS cyclical nature while a non-negligible c40% proportional EBITDA exposure to EM may be favoured by a pause in interest rates hikes and stabilization of USD at higher yoy levels. Improved earnings and CF visibility remain triggers that we expect to unlock a re-rating of the stock particularly if corroborated by a significant shareholder remuneration step up. BUY.

Team leader:

Bruno Silva, CFA [email protected]

Phone 351 22 607 4375

Filipe Leite, CFA [email protected] Phone 351 22 607 3136

BUYPrev. BUY

Medium Risk

Price TargetPrevious

Company Profile

Bloomberg/Reuters

Close Price at 30-Jan

52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float

Market Multiples 2018F 2019F 2020F

PE 12.6 12.2 11.8

EV/Sales 0.4 0.4 0.4

EV/EBITDA 6.3 6.1 6.1

EV/EBIT 8.8 8.8 8.8

DY 3.8% 5.2% 5.3%

FCFE Yield (%) (1) 5.0% 10.5% 9.5%

FCFF Yield (%) 9.2% 14.4% 13.3%

PBV 2.6 2.2 2.0

ACS vs. IBEX

Source: Bloomberg

(1) ACS ex-HOT (incl. ABE SPV DIV.) + HOT DIV.

Source: Bloomberg and CaixaBank BPI ER

314.7

34.1

88%

€ 42.70€ 43.10

ACS SM / ACS.MC

€ 36.22

€ 26.1 - 37.3

11,397

70

80

90

100

110

120

Feb-18 Aug-18 Jan-19

ACS

IbexEstimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 33,291 31,975 34,898 36,764 38,194 39,243 39,501

EBITDA (€ mn) 2,141 2,023 2,279 2,386 2,449 2,472 2,482

Margin (%) 6% 6% 7% 6% 6% 6% 6%

NP (€ mn) 725 751 802 903 936 964 1,077

EPS (€) 2.31 2.39 2.55 2.87 2.98 3.06 3.42

DPS (€) 1.15 1.15 1.20 1.39 1.87 1.93 1.99

Capex (€ mn) 393 621 643 424 420 412 419

Adj. FCF (€ mn) 2,030 1,204 1,647 1,377 2,151 1,996 2,006

Net debt (€ mn) 2,630 1,214 153 248 -693 -1,465 -2,259

Net Debt/EBITDA 1.2 0.6 0.1 0.1 -0.3 -0.6 -0.9

Source: Company, CaixaBank BPI Equity Research (F).

https://www.bpiequity.bpi.pt/others/fileHistoricRec.aspx?emp=00019128

ACS

page 18

INVESTMENT REPORT

February 4, 2019

ACS at a Glance

FY17 Revenue Breakdown by segment FY17 Revenue Breakdown by region

Construction revenues by region (FY17) Ind. Serv. revenues breakdown (FY17)

Net Debt evolution (€mn) FCFE vs. Dividends (€mn)

Source: ACS and CaixaBank BPI Equity Research.

Actividades de Construccion y Servicios (ACS) is an engineering and contracting company that develops civil and industrial infrastructures.

The Company provides Civil Works Construction, Greenfield Concession Development, Industrial Services (electricity, oil and gas) and

Environmental Services.

Constructon ex HOT

13%

HOT 65%

Industrial Services

18%

Env. Services

4%

Concessions 0%

Spain 5% Rest of Europe 7%

North America

52%

South America 2%

Asia Pacific 34%

US 38%

Australia20%

Spain 13%

Hong Kong 4%

Canada4%

Mexico 3%

Germany3%

Others16%

Support Services

53%

EPC 46%

Renewable Energy 1%

3435

19181419

17431332

1071821

-805 -704 -1266-1495 -2025

-2537

-3079

2015 2016 2017 2018F 2019F 2020F 2021F

Net Debt from ACS Ex HOT Net Cash from HOT

800 657 661 675

195210 213 256

175206 210 224

2.0x 1.8x 1.7x 1.7x

-10x-9x-8x-7x-6x-5x-4x-3x-2x-1x0x1x2x3x

0200400600800

100012001400

2019F 2020F 2021F 2022F

HOT Div. (50.41%)ABE SPV Div (30%)FCFE ex HOT(FCFE EX HOT + ABE & HOT Div) / ACS Div.

ACS

page 19

INVESTMENT REPORT

February 4, 2019

Consensus and Stock Momentum

BPI Equity Research Forecasts

CaixaBank BPI estimates/Consensus EBITDA Consensus (€ mn) EPS Consensus (€)

2018F

2019F

2020F

Revenues 0% 0% 0%

EBITDA -1% -2% -4%

EBIT 2% 1% -3%

Net Profit 0% -5% -5%

Market Price Rating (€) Fair Value Comparison (€) Market Recommendations

Source: Bloomberg and CaixaBank BPI Equity Research

19Y

20Y

21Y

2300

2500

2700

2900

May-17 Nov-17 May-18 Dec-18

19Y

20Y

21Y

2.4

2.8

3.2

3.6

May-17 Dec-17 Jun-18 Dec-18

30

34

38

42

46

Consensus BPI

Current Market Price

Positive

Neutral

20.0

24.0

28.0

32.0

36.0

40.0

44.0

Jan-17 Aug-17 Apr-18 Dec-18

Price

Price Target Consensus

€ mn 2014 2015 2016 2017 2018F

2019F

2020F

2021F

Revenues 34881 34924 31975 34898 36764 38194 39243 39501

Constructon ex HOT 3643 4152 4236 4498 4822 4917 5014 5114

HOT 22099 21097 19908 22631 23826 24965 25749 25737

Industrial Services 6750 6501 6256 6260 6507 6670 6804 6940

Env. Services 2338 3138 1538 1446 1518 1548 1579 1611

Concessions 77 71 72 92 112 116 119 123

Holding -27 -34 -35 -29 -22 -22 -23 -23

EBITDA 2466 2409 2023 2279 2386 2449 2472 2482

Constructon ex HOT 295 292 296 313 338 342 349 356

HOT 1007 1143 997 1294 1353 1412 1413 1402

Industrial Services 902 680 630 633 658 656 669 682

Env. Services 291 342 78 73 80 81 83 85

Concessions 21 4 4 14 17 17 18 18

Holding -49 -51 19 -49 -59 -59 -60 -62

EBITDA mg 7.1% 6.9% 6.3% 6.5% 6.5% 6.4% 6.3% 6.3%

Constructon ex HOT 8.1% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

HOT 4.6% 5.4% 5.0% 5.7% 5.7% 5.7% 5.5% 5.4%

Industrial Services 13.4% 10.5% 10.1% 10.1% 10.1% 9.8% 9.8% 9.8%

Source: ACS and CaixaBank BPI Equity Research.

CAGR17-21F

3%

3%

3%

3%

3%

7%

-5%

2%

3%

2%

2%

4%

8%

6%

ACS

page 20

INVESTMENT REPORT

February 4, 2019

Financials

CAGR Shareholder structure2015 2016 2017 2018F 2019F 2020F 2021F 17-21F

Revenues 33291 31975 34898 36764 38194 39243 39501 3%

EBITDA 2141 2023 2279 2386 2449 2472 2482 2%

EBITDA adj. 2141 2023 2279 2386 2449 2472 2482 2%

EBITDA adj. mg. 6.4% 6.3% 6.5% 6.5% 6.4% 6.3% 6.3%

Depreciation & others -720 -578 -653 -606 -609 -629 -635 -1%

EBIT 1191 1314 1440 1692 1752 1754 1758 5%

EBIT adj. 1259 1378 1482 1724 1752 1754 1758 4%

Net financial results -475 -340 -283 -272 -260 -224 -191 -9%

Income tax -292 -407 -330 -398 -416 -427 -437 7%

Others 621 442 260 237 404 412 539 n.s.

Minority Interests -320 -258 -285 -357 -543 -552 -592 20%

Net Profit reported 725 751 802 903 936 964 1077 8%

Net Profit adj. 725 751 802 903 936 964 1077 8% Source: ACS and CNMV.

CAGR

2015 2016 2017 2018F 2019F 2020F 2021F 17-21F Valuation Summary (€ mn)Net Intangibles 4854 4589 4431 4431 4431 4431 4431 0%

Net Fixed Assets 2447 1760 1537 3337 3148 2931 2715 15% EV/

Net Financials 4279 3994 3236 2923 3001 3063 3246 0% Unit (Method/WACC) €mn EBITDA

Inventories 1468 1407 1020 1075 1117 1147 1155 3% Dragados (DCF / 9.4% ) 1,594 4.7

ST Receivables 10916 10988 10753 11328 11769 12092 12171 3% Industrial Serv. (DCF / 9.1% ) 4,697 7.2

Other Assets 3201 3188 3017 2903 2824 2775 2742 -2% Env. Serv. (DCF / 7.6% ) 667 8.2

Cash & Equivalents 8115 7475 7886 7839 8310 8696 9092 4% Concessions (1x Inv. Capital) 1,120

Total Assets 35280 33400 31881 33836 34599 35134 35552 3% Holding costs (5XEBITDA) -296

Equity & Minorities 5197 4968 5164 6712 7329 7933 8669 14% Total EV 7,782

MLT Liabilities 10689 7934 7903 7935 7935 7935 7935 0% Hochtief (50.4% ) (1) 5,838

o.w. Debt 7382 4907 5161 5161 5161 5161 5161 0% Abertis (30% ) (2) 1,845

ST Liabilities 19393 20498 18813 19189 19334 19266 18948 0% YE19 Net Debt adj. (3) -2,261

o.w. Debt 3363 3782 2879 2926 2456 2070 1673 -13% Provisions+DTA (ex-HOT) -446

o.w. Payables 13923 14864 14279 14607 15223 15541 15620 2% Equity accounted (1x BV) 474

Equity+Min. + Liabilities 35280 33400 31881 33836 34599 35134 35552 3% Available for Sale (4) 284

Minorities (ex-HOT) -121

Treasury Shares (0.7% @ MV) 42

2015 2016 2017 2018F 2019F 2020F 2021F Total Equity 13,437

+ EBITDA 2141 2023 2279 2386 2449 2472 2482 # shares (mn) 315

- Chg in Net W.C. 625 -21 192 -301 134 -36 -8 YE19 Price Target (€) 42.70

- Income Taxes -342 -177 -181 -283 -337 -378 -404

= Operating Cash Flow 2423 1825 2290 1802 2246 2057 2069

- Growth Capex -132 -289 -271 -1950 0 0 0

- Replacement Capex -261 -332 -372 -424 -420 -412 -419

- Net Fin. Inv. 0 0 0 0 326 350 356

= Cash Flow after Inv. 2030 1204 1647 -572 2151 1996 2006

- Net Fin. Exp. -475 -363 -283 -272 -260 -224 -191

- Dividends Paid -345 -326 -351 -434 -585 -606 -624

+/- Equity 0 0 0 0 0 0 0

Other -118 900 48 1183 -365 -393 -397

=Change in Net Debt -1093 -1415 -1061 95 -941 -772 -793 ACS FV Sensitivity Analysis (€/sh)Net Debt (+)/Net Cash (-) 2630 1214 153 248 -693 -1465 -2259 Perp. EBIT mg

1% - -1%

-1% 55.63 49.23 42.84

2015 2016 2017 2018F 2019F 2020F 2021F WACC - 47.80 42.70 37.61

Sales growth -5% -4% 9% 5% 4% 3% 1% 1% 42.04 37.88 33.73

EBITDA Adj. growth -16% -5% 13% 5% 3% 1% 0% Source: CaixaBank BPI Equity Research

EPS Adj. growth 1% 4% 7% 13% 4% 3% 12%

Avg. # sh (mn) 314.7 314.7 314.7 314.7 314.7 314.7 314.7

Basic EPS 2.31 2.39 2.55 2.87 2.98 3.06 3.42 Change in EstimatesEPS Adj. Fully diluted 2.31 2.39 2.55 2.87 2.98 3.06 3.42

DPS 1.15 1.15 1.20 1.39 1.87 1.93 1.99 2018F 2019F 2020F 2021F

Payout 51% 50% 50% 54% 65% 65% 65% Sales 0% 0% 0% 0%

ROCE (after tax) 11% 11% 18% 19% 19% 19% 20% EBITDA 0% -1% -1% -1%

ROE 14% 15% 16% 15% 13% 13% 13% Net Profit 0% 3% 6% 8%

Gearing (ND/EV) 18% 8% 1% 2% -5% -10% -15% DPS 0% 25% 32% 30%

Net Debt/EBITDA 1.2x 0.6x 0.1x 0.1x -0.3x -0.6x -0.9x Source: CaixaBank BPI Equity Research

Source: companies, CaixaBank BPI Equity Research (F).

P&L (€ mn)

Balance Sheet (€ mn)

Cash flow (€ mn)

Growth, per share data and ratios

(1) In House Equity Valuation (€164/sh for YE19 vs.

€132/sh mrk price); (2) In House Equity Valuation

(€16.2bn for 100% vs. €16.7bn price paid); (3) Adj. for

HOT YE19 net cash (€2.0bn), factoring ex HOT

(€0.9bnF) and Masmovil (€64mn); (4) Inc. 2.9% stake

in MasMovil. Source: CaixaBank BPI Equity Research

Florentino Perez-Chairman

13%

Blackrock

3%

Others

84%



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FAES HEALTHCARE / Spain

04 Feb. 19 (06:00) (1)


Solid as a rock

Bilastine expansion and mature products recycling drives solid earnings momentum, potential triggers ahead Solid growth in Spain...: Faes domestic performance should continue

backed by positive deliveries across the majority of the products, but namely at Bilaxten (Bilastine, an in-house developed antihistamine) and Hidroferol (Calcifediol, for vitamin D insufficiency). ….and abroad: in parallel, international operations should benefit from the

progressive penetration of Bilastine oral namely in Japan, the ramp-up of other Bilastine variants (paediatric, orodispersible, ophtalmologic) and the recycling of mature products (eg. Calcifediol) namely in Europe and LatAm. Margins should benefit from an improved business mix and M&A synergies. Overall, we expect a 17% EBITDA CAGR’18-21 (unchanged). Further sources of upside? The entrance of Bilastine oral in the US has

been a long lasting process, but with recent positive developments (some hurdles overcome during 2018). A successful outcome on this front could drive a 15-40% impact in our valuation. The expansion of Bilastine oral into China and the development of new formulations of Bilastine could be other sources of upside to our estimates, but visibility remains limited at this stage. Attractive valuation: Faes is trading at an attractive 10.4x EV/EBITDA’19F,

below the historical 12.0x reference and with a 11% discount to the sector (vs. a 2% through-the-cycle average premium). Although its mature product-portfolio and significant reliance on Bilastine have been structural drawbacks to the investment case, the successful recycling of old products and Bilastine expansion into new geographies are growth opportunities that we believe the market is currently underestimating. The rising FCFF (5.9% yield for 2019F) and the appealing >20% upside to our YE19 PT of €3.95 (unchanged) also support our upgrade from Neutral to Buy. Further details regarding Bilastine

expansion, new licensing deals and pipeline developments (to be possibly announced in March‘s investor day) might be triggers ahead.

Team leader

José Rito [email protected]

Phone 351 22 607 3142

Author of this report* Guilherme Macedo Sampaio, CFA* [email protected] Phone 351 22 607 3179

BUYPrev. Neutral

Medium Risk


Company Profile

Reuters/Bloomberg


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float


PE 17.5 15.6 13.5

EV/Sales 2.6 2.4 2.2

EV/EBITDA 12.0 10.4 8.8

EV/EBIT 13.7 11.9 10.0

DY 1.1% 1.3% 1.5%

FCFE Yield (%) 5.0% 5.7% 6.8%

FCFF Yield (%) 5.2% 5.9% 7.1%

PBV 4.2 3.7 3.2

Source: Bloomberg, CaixaBank BPI ER

Faes vs. IBEX

Source: Bloomberg

266.6

1.5

98%

€ 3.95€ 3.95

FAE.MC/FAE SM

€ 3.25

€ 2.60 - 3.76

866

60

80

100

120

140

Jan/18 May/18 Aug/18 Oct/18 Jan/19

FaesIbex

Estimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 205 229 275 323 352 384 417

EBITDA (€ mn) 47 53 58 70 80 95 111

Margin (%) 23.0% 23.4% 21.0% 21.6% 22.9% 24.8% 26.5%

NP (€ mn) 30 37 42 50 57 69 81

EPS (€) 0.12 0.15 0.16 0.19 0.21 0.24 0.27

DPS (€) 0.02 0.02 0.03 0.04 0.04 0.05 0.06

Capex (€ mn) 11 12 94 15 15 15 16

Adj. FCF (€ mn) 30 39 -55 43 49 59 67

Net Debt (€ mn) -26 -59 4 -31 -71 -119 -173

Net Debt/EBITDA -0.5 -1.1 0.1 -0.5 -0.9 -1.3 -1.6

Source: Company, CaixaBank BPI Equity Research (F)


FAES

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INVESTMENT REPORT

February 4, 2019

FAES at a Glance

Main products by sales 2017 M&A deals in 2017

(1) Excluding integration costs.

Operating evolution Financial leverage evolution

Source: Faes, CaixaBank BPI Equity Reseach

Investment

(€ mn)

70.0

15.0

5.5

EV/

EBITDA'17F(1)

14.0

7.5

n.a.

Area

OTC

Animal

Pharma

Animal

Pharma

Cardiovascular

Bone metabolism

Company

Diafarm

Tecnovit

Initial Technical

Foods

Faes is a Madrid-based pharmaceutical company exposed to several therapeutic areas, including respiratory, cardiovascular and

gastroenterology. Its main drug is Bilastine, an antihistamine for the treatment of allergic rhinitis and urticarial, w hich show s up on top

of a diversif ied but relatively mature portfolio of proprietary and in-licensed products. The group also has a foothold in animal nutrition

and healthcare (15% of revenues). Founded in 1933 (and listed since 1997), Faes presently counts w ith more than 700 employees

and ended 2017 w ith revenues of €275mn.

Bilastine

Sitagliptin,

Metformin

Calcifediol

Allergic

rhinoconjunctivitis

Diabetes type II

Vitamin D

insuff iciency

% of

salesIndication Business areaActive ingredient

21%

8%

8%

Respiratory

Revenue breakdown by business area 2017

Animal Nutrition

15%

Specialty Pharma62%

Other (incl. OTC

& Raw Materials)

, 23%

-2x

-1x

0x

1x

2x

-200

-150

-100

-50

0

50

100

2012 2014 2016 2018F 2020F

Net Debt (€ mn, LHS) ND/Rec. EBITDA

Spain41%

Portugal7%

International10%

Bilastine Licenses

13%

Animal Nutrition

15%

Other (incl. OTC & Raw

Materials)14%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

2012 2014 2016 2018F 2020F

Net Revenues (€ mn, LHS) Rec. EBITDA mg

FAES

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INVESTMENT REPORT

February 4, 2019


CaixaBank BPI Equity Research Forecasts


2018 2019 2020

Revenues -1% 1% 3%

EBITDA -3% -6% -5%

EBIT -2% -6% -5%

Net Profit -6% -8% -5%

Net Debt n.s. n.s. n.s.


Source: Bloomberg, CaixaBank BPI Equity Research

18Y

19Y

20Y

40

50

60

70

80

90

100

110

120

May-16 May-17 May-18

18Y

19Y

20Y

0.15

0.20

0.25

0.30

0.35

May-16 May-17 May-18

3.93 3.95

0

1

2

3

4

5

Consensus BPI


Positive50%

Negative0%

Neutral50%

0

1

2

3

4

5

Jan-17 Sep-17 May-18 Dec-18

Price


€ mn 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F

Revenues 205 229 275 323 352 384 417 439 420

o.w . Spain 101 111 113 117 124 132 138 143 119

o.w . Portugal 32 34 32 32 33 34 35 35 36

o.w . International 26 29 32 37 41 45 49 54 59

o.w . Bilastine Licenses 18 29 35 40 53 69 87 96 92

o.w . Diafarm 0 0 25 50 52 54 56 57 58

o.w . Animal Nutrition 30 27 43 53 55 57 59 61 63

EBITDA 47 53 58 70 80 95 111 123 117

margin 23.0% 23.4% 21.0% 21.6% 22.9% 24.8% 26.5% 28.0% 28.0%

Net Profit 30 37 42 50 57 69 81 91 87

Net Debt -26 -59 4 -31 -71 -119 -173 -234 -304

Revenue grow th 7% 12% 20% 18% 9% 9% 9% 5% -4%

EBITDA grow th 12% 13% 8% 21% 15% 18% 16% 11% -4%

Net Profit grow th 20% 21% 15% 18% 15% 20% 19% 12% -5%

Net Debt/EBITDA -0.5x -1.1x 0.1x -0.5x -0.9x -1.3x -1.6x -1.9x -2.6x

ROCE (after tax) 13.6% 16.3% 15.2% 15.6% 17.1% 20.0% 22.9% 24.7% 23.1%

Source: CaixaBank BPI Equity Research

FAES

page 24

INVESTMENT REPORT

February 4, 2019

Financials


Revenues 205 229 275 323 352 384 417 7%

EBITDA 47 53 58 70 80 95 111 18%

EBITDA adj. 47 53 58 70 80 95 111 18%

EBITDA adj. mg. 23.0% 23.4% 21.0% 21.6% 22.9% 24.8% 26.5%

Depreciation & others 8 8 6 9 10 11 12 18%

EBIT 39 46 52 61 70 84 99 18%

EBIT adj. 39 46 52 61 70 84 99 18%

Net financial results 1 0 -1 0 0 1 1 n.s.

Income tax 9 9 8 11 13 16 19 22%

Others 0 0 0 0 0 0 0 n.s.

Minority Interests 0 0 0 0 0 0 0 11%


Net Profit adj. 30 37 42 50 57 69 81 18% Source: CNMV

CAGR Valuation Summary (€ mn)2015 2016 2017 2018F 2019F 2020F 2021F 17-21F ch.

Net Intangibles 94 90 159 165 170 175 181 3% Enterprise Value 1,132 0%

Net Fix ed Assets 30 38 58 57 57 56 55 -1% YE19 Net Cash 71 -1%

Net Financials 9 9 2 2 2 2 2 0% Non-Core Assets 2 0%

Inv entories 34 38 50 59 64 69 74 10% Equity Value 1,204 0%

ST Receiv ables 98 97 118 121 128 136 148 6% # Shares (mn) 275 0%

Other Assets 0 0 0 0 0 0 0 n.s. YE19 Fair Value (€) 4.39 0%

Cash & Equiv alents 26 59 43 63 87 119 173 41% Small Cap Discount 10%

Total Assets 291 331 430 469 508 556 632 10% YE19 Price Target (€) 3.95 0%

Equity & Minorities 254 285 321 363 410 467 535 14% Source: CaixaBank BPI Equity Research

MLT Liabilities 7 11 55 47 33 18 20 -22%

o.w . Debt 0 0 43 32 16 0 0 n.s. DCF AssumptionsST Liabilities 29 36 55 58 65 71 77 9%

o.w . Debt 0 0 5 0 0 0 0 n.s. Re 8.6%

o.w . Pay ables 29 36 50 58 65 71 77 11% Rf 3.25%

Equity+Min. + Liabilities 291 331 430 469 508 556 632 10% CRP 0.75%

Beta Equity 0.8

Mkt Premium 6.0%

2015 2016 2017 2018F 2019F 2020F 2021F Rd 4.8%

+ EBITDA 47 53 58 70 80 95 111 Tax rate 25.0%

- Chg in Net W.C. 2 0 22 1 5 6 5 D/EV 0.0%

- Tax es Paid 3 3 4 11 12 15 22 WACC 8.6%

= Operating Cash Flow 42 51 32 58 64 74 84 g 2.0%

- Grow th Capex 0 0 91 0 0 0 0 Source: CaixaBank BPI Equity Research

- Replacement Capex 11 12 4 15 15 15 16

- Net Fin. Inv . 1 0 -7 0 0 0 0 Sensitivity Analysis (€/sh)= Cash Flow after Inv. 30 39 -55 43 49 59 67

- Net Fin. Ex p. -1 0 1 0 0 -1 -1 -0.5pp Δ g +0.5pp

- Div idends Paid 5 5 6 8 10 11 14 -0.5pp 4.07 4.26 4.47

+/- Equity 0 0 0 0 0 0 0 Δ WACC 3.80 3.95 4.12

Other 0 -1 0 0 0 0 0 +0.5pp 3.56 3.68 3.83

=Change in Net Debt -26 -33 63 -35 -39 -48 -54 Source: CaixaBank BPI Equity Research

Net Debt (+)/Net Cash (-) -26 -59 4 -31 -71 -119 -173

Market Multiples2015 2016 2017 2018F 2019F 2020F 2021F

Sales grow th 7% 12% 20% 18% 9% 9% 9%

EBITDA Adj. grow th 12% 13% 8% 21% 15% 18% 16% 18F

19F

18F

19F

EPS Adj. grow th 14% 17% 12% 14% 12% 16% 14% Faes 12.0 10.4 17.5 15.6

Av g. # sh (mn) 238.3 248.1 254.8 262.3 270.6 279.7 291.1 Almirall 14.0 10.7 22.5 19.0

Basic EPS 0.13 0.15 0.17 0.19 0.21 0.25 0.28 Rov i 34.2 24.6 72.5 45.0

EPS Adj. Fully diluted 0.12 0.15 0.16 0.19 0.21 0.24 0.27 Pfizer 11.7 12.9 14.2 14.1

DPS 0.02 0.02 0.03 0.04 0.04 0.05 0.06 Sanofi 11.4 10.8 13.7 13.0

Pay out 17.1% 17.2% 17.9% 19.6% 19.9% 20.2% 20.6% Nov artis 11.7 14.5 17.2 15.7

ROCE (after tax ) 13.6% 16.3% 15.2% 15.6% 17.1% 20.0% 22.9% GSK 9.3 9.2 12.8 13.1

ROE 12.6% 13.6% 13.9% 14.5% 14.8% 15.7% 16.2% Takeda 21.7 11.3 32.8 39.3

Gearing (ND/EV) -5.2% -15.6% -9.0% -4.0% -13.2% -21.6% -29.1% Ipsen 13.3 11.1 18.6 15.3

Net Debt/EBITDA -0.5x -1.1x 0.1x -0.5x -0.9x -1.3x -1.6x Average 13.2 11.6 18.2 18.4

Source: CaixaBank BPI ER, Bloomberg

P/EEV/EBITDA

Source: Company data, CaixaBank BPI Equity Research

P&L (€ mn)


Cash flow (€ mn)


Norges Bank 3.1% Board Members

2.5%

Others94.4%



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FERROVIAL INFASTRUCTURES / Spain

04 Feb. 19 (06:00) (1)


Premium Concessions; exiting Services

Balanced portfolio mix, dividend growth potential and relevant triggers ahead

Balanced portfolio mix between toll road concessions (64% of Equity value),

construction (19%), Services (9%) and Airports (8%) and highly exposed to North America (67% of equity value) and the UK (12%). A sale of the Services unit could allow a re-rating of the stock due to increased capital allocation into the more highly-valued concession unit and possible deal value recognition. Concessions vs. construction/services – two distinct realities: The

recent weak earnings momentum of Construction and Services divisions (and guidance of no margin recovery in construction during 2019) has been offset by an outperforming Concession business, namely ETR-407 in Canada and US managed lanes that together represent 64% of our equity target. ETR-407 announced at YE18 a c.9% average tariffs increase proving, once again, its pricing power (supported by alternative routes congestion and regional GDP expectations) while SNC-Lavalin continues the process to sell a 6.77% stake. The annual update of Ferrovial toll roads valuation is expected during 2Q19. Sale of Services division during 2019? FER is analysing the potential sale

of the whole service division or part of it with the press flagging a €3bn valuation (vs. our €2.6bn EV; €1.7bn equity value). The process is said to be drawing the interest of many, including Infrastructure funds and Asian players. YE19 Price Target set at €22.00 (+2%) … BUY reiterated: For 4Q18 FER

management guided to a tighter WK recovery vs 4Q17 which benefited from advances on relevant new contracts (BPIF: +€0.5bn in 4Q18; +€0.7bn 4Q17). YE18 net cash ex-infrastructures should reach €1.2bn (also helped by the sale of Greek concessions during December for €85mn). We keep our BUY

stance supported by an expected base-case c.21% TSR with upside risk coming from potential asset rotation and dividend growth (4.1% DY19F and 4% DPS CAGR18-21F; more than 80% covered by subsidiaries).

Team leader:

Bruno Silva, CFA [email protected]

Phone 351 22 607 4375

Filipe Leite, CFA [email protected] Phone 351 22 607 3136

BUYPrev. Buy

Medium Risk

Target PricePrevious

Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float

Ratios 2018F 2019F 2020F

PE n.s. 37.2 30.3

EV/Sales 1.3 1.3 1.2

EV/EBITDA 25.2 16.8 15.0

EV/EBIT 57.0 27.4 22.5

DY 3.9% 4.1% 4.4%

FCFE Yield (%) 3.2% 4.1% 5.1%

FCFF Yield (%) 1.5% 3.8% 4.5%

PBV 2.8 2.9 3.0

Ferrovial vs. IBEX

Source: Bloomberg

Source: Bloomberg, CaixaBank BPI Equity

Research

733

27.7

61%

€ 22.00€ 21.60

FER.MC / FER SM

€ 19.30

€ 15.5 - 19.7

14,138

75

85

95

105

115

Jan-18 Apr-18 Jul-18 Oct-18

FER

IBEXEstimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 9,701 10,758 12,208 12,168 12,150 12,282 12,550

EBITDA (€ mn) 1,026 944 932 606 907 1,014 1,107

Margin (%) 11% 9% 8% 5% 7% 8% 9%

NP (€ mn) 720 376 454 116 380 466 543

EPS (€) 0.98 0.51 0.62 0.16 0.52 0.64 0.74

DPS (€) 0.69 0.71 0.72 0.72 0.75 0.79 0.85

Capex (€ mn) 765 961 436 508 232 219 233

Adj. FCF (€mn) 145 -216 301 228 579 684 776

Net debt (€ mn) 4,542 4,266 3,463 3,771 3,753 3,619 3,426

Net Debt/EBITDA 4.4 4.5 3.7 6.2 4.1 3.6 3.1



FERROVIAL

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INVESTMENT REPORT

February 4, 2019

Ferrovial at a Glance

FY17 Revenues by unit (€12.2bn) FY17 Revenues by geography (€12.2bn)

FY17 EBITDA (€932mn) FY17 Proportional EBITDA (€1.7bn)

FY17 Operating CF (€999mn)

Source: Ferrovial, CaixaBank BPI Equity Research

Ferrovial is one of the world's leading infrastructure operators and municipal services companies.The company’s activity is carried out through

four business lines: Services: provision of urban and environmental services and maintenance of infrastructures and facilities; Toll Roads:

promotion, investment and operation of toll roads and other infrastructures; Construction: the design and construction of infrastructures in the

areas of civil engineering work, building and industrial construction and Airports: airport investment and operation.

Construction38%

Services58%

Concessions4%

Construction21%

Services45%

Concessions34%

Construction13%

Services38%

Concessions26%

Airports23%

Construction 8%

Services25%

Concessions36%

Airports31%

UK 24%

Spain 23%US & Canada

14%

Poland13%

Australia21%

Others 6%

304 236 272 245134

359302 289 395

396

242255 267

290277

219 341

132134 237

-27 -58 -70 -69 -46

2013 2014 2015 2016 2017

Op. CF Construction Op. CF Services Dividends Toll roads

Dividends Airports Holding

FERROVIAL

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INVESTMENT REPORT

February 4, 2019




2018 2019 2020

Revenues 0% -3% -4%

EBITDA 3% 2% 3%

EBIT 6% 2% 8%

Net Profit n.s. -5% -2%

Net Debt -5% -7% -13%



19Y

20Y

21Y

800

900

1000

1100

1200

May-17 Nov-17 May-18 Nov-18

19Y

20Y

21Y

0.40

0.60

0.80

1.00

1.20

May-17 Nov-17 May-18 Nov-18

14

16

18

20

22

24

Consensus BPI


Positive

Negative

Neutral

14.0

16.0

18.0

20.0

22.0

24.0

Jan-17 Sep-17 May-18 Dec-18

Price


Revenues (€mn) 2015 2016 2017 2018F 2019F 2020F 2021F

Construction 4287 4194 4628 5213 5214 5271 5364

Services 4897 6078 7068 6443 6380 6409 6549

Concessions 513 486 461 461 506 551 586

Holding 4 -4 30 30 30 30 31

Total 9701 10758 12208 12168 12150 12282 12550

EBITDA (€mn) 2015 2016 2017 2018F 2019F 2020F 2021F

Construction 393 342 199 184 183 223 255

Services 312 325 423 110 370 394 423

Concessions 333 297 320 323 365 407 440

Holding 1 -2 2 1 2 2 2

Total 1026 944 932 606 907 1014 1107

EBITDA mg 2015 2016 2017 2018F 2019F 2020F 2021F

Construction 9.2% 4.3% 4.3% 3.5% 3.5% 4.2% 4.8%

Services 6.4% 6.0% 6.0% 1.7% 5.8% 6.1% 6.5%

Concessions 64.9% 69.4% 69.4% 70.1% 72.1% 73.8% 75.0%

Source: CaixaBank BPI Equity Research

Revenues CAGR

17-21F

4%

-2%

6%

8%

4%

4%

1%

1%

17-21F

6%

0%

FERROVIAL

page 28

INVESTMENT REPORT

February 4, 2019

Financials


Revenues 9701 10758 12208 12168 12150 12282 12550 1%

EBITDA 1026 944 932 606 907 1014 1107 4%

EBITDA adj. 1026 944 932 606 907 1014 1107 4%

EBITDA adj. mg. 10.6% 8.8% 7.6% 5.0% 7.5% 8.3% 8.8%

Depreciation & others -125 -18 -294 -339 -351 -335 -341 n.s.

EBIT 901 926 638 268 556 679 766 5%

EBIT adj. 770 602 557 261 556 679 766 8%

Net financial results -324 -310 -60 -36 -3 31 76 n.s.

Income tax 54 -233 -71 -60 -78 -107 -131 17%

Others 0 0 0 0 0 0 0 n.s.

Minority Interests 89 -7 -53 -56 -94 -136 -168 33%


Net Profit adj. 336 52 373 109 380 466 543 10% Source: Ferrovial, CNMV

CAGR

2015 2016 2017 2018F 2019F 2020F 2021F 17-21F Valuation Summary (€ mn)Net Intangibles 2119 2699 2493 2450 2407 2364 2321 -2%

Net Fixed Assets 7463 7882 7618 7824 7748 7675 7610 0%

Net Financials 5579 3792 3497 3246 3099 2966 2853 -5% € mn chg.

Inventories 387 516 629 627 626 633 647 1% Construction 3331 -1%

ST Receivables 1956 2379 2175 2454 2503 2579 2657 5% Airports 1477 -2%

Other Assets 4340 2328 1693 1655 1618 1588 1566 -2% Services 1694 1%

Cash & Equivalents 3540 3827 4885 5136 5129 5184 5298 2% Cintra 11369 2%

Total Assets 25384 23423 22990 23392 23130 22989 22950 0% ETR-407 8172 3%

Equity & Minorities 6541 6314 6234 5732 5559 5454 5375 -4% US 2184 0%

MLT Liabilities 7135 8510 8096 8115 8134 8154 8173 0% Spain 684 0%

o.w. Debt 6697 7874 7511 7511 7511 7511 7511 0% Portugal 154 0%

ST Liabilities 11708 8599 8660 9545 9437 9381 9402 2% Others+Holding 175 -11%

o.w. Debt 1385 302 839 1396 1370 1292 1212 10% Total Equity 17871 1%

o.w. Payables 3484 3895 4221 4406 4400 4447 4545 2% Prov. & Others -305 0%

Equity+Min. + Liabilities 25384 23423 22990 23392 23130 22989 22950 0% Fin. Investments 138 3%

Holding & deriv. -1588 -5%

Equity 16116 2%

2015 2016 2017 2018F 2019F 2020F 2021F # shares (mn) 733

+ EBITDA 1026 944 932 606 907 1014 1107 YE19 PT(€) 22.00 2%

- Chg in Net W.C. -55 -52 -53 -83 -54 -39 -4 Source: CaixaBank BPI Equity Research.

- Income Taxes -61 -147 -142 -24 -42 -71 -95

= Operating Cash Flow 910 745 737 500 812 903 1009

- Growth Capex -571 -746 -192 -265 -50 -35 -44 DCF Assumptions- Replacement Capex -194 -215 -244 -243 -182 -184 -188

- Net Fin. Inv. 0 0 0 0 0 0 0

= Cash Flow after Inv. 145 -216 301 -9 579 684 776 Const. UK Spain

- Net Fin. Exp. -344 -354 -283 -262 -261 -256 -245 Re 9.0% 12.0% 12.7%

- Dividends Paid -532 -543 -520 -528 -559 -593 -643 Rf 3.25% 3.25% 3.25%

+/- Equity 0 0 0 0 0 0 0 CRP 0.99% 0.00% 0.71%

Other 2419 1389 1306 491 258 299 305 Beta Assets 0.80 0.70 0.70

=Change in Net Debt -1688 -276 -803 308 -18 -134 -193 Mkt Premium 6.0% 6.0% 6.0%

Net Debt (+)/Net Cash (-) 4542 4266 3463 3771 3753 3619 3426 Rd 6.24% 5.25% 5.96%

D/EV 0% 60% 60%

Tax rate 26.3% 28.0% 28.0%

2015 2016 2017 2018F 2019F 2020F 2021F WACC 9.0% 7.1% 7.7%

Sales growth 10% 11% 13% 0% 0% 1% 2% Source: CaixaBank BPI Equity Research.

EBITDA Adj. growth 4% -8% -1% -35% 50% 12% 9%

EPS Adj. growth -15% -85% 624% -71% 250% 22% 17%

Avg. # sh (mn) 732.2 732.5 732.5 732.5 732.5 732.5 732.5

Basic EPS 0.98 0.51 0.62 0.16 0.52 0.64 0.74

EPS Adj. Fully diluted 0.46 0.07 0.51 0.15 0.52 0.64 0.74 Fair Value Sensitivity to Rf (€/sh)DPS 0.69 0.71 0.72 0.72 0.75 0.79 0.85

Payout 72% 141% 116% n.s. 151% 134% 124% Risk Free Fair Value

ROCE (after tax) 5.4% 6.0% 4.4% 2.0% 4.1% 5.2% 6.0% 2.25% 27.12

ROE 12.3% 6.4% 8.2% 2.2% 7.8% 9.8% 11.7% 3.25% 22.00

Gearing (ND/EV) 29.8% 28.0% 22.7% 24.7% 24.6% 23.7% 22.4% 4.25% 18.50

Net Debt/EBITDA 4.4x 4.5x 3.7x 6.2x 4.1x 3.6x 3.1x Source: CaixaBank BPI Equity Research.

Services

Equity

DCF

Source: Company data, CaixaBank BPI Equity Research

DCF, BV

Method

DCF, BV

BV

DCF

DCF

RAB/DCF

P&L (€ mn)


Cash flow (€ mn)


Rafael Del Pino

20% Maria Del Pino

8%

Leopoldo

Del Pino5%

Joaquim del

Pino3%

Blackrock

3%

Fidelity

2%

Other

59%

Equity

Company Report



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IBERDROLA UTILITIES / Spain

04 Feb. 19 (06:00) (1)


Plan delivery on track; S/T earnings tailwinds

S/T tailwinds, discounted multiples despite higher growth and dividends, limited volatility, geographic diversification 2018-22F plan update in late February to give comfort on delivery: IBE

will update its current 2018-22F €32bn capex plan on 26th Feb. during a CMD in London. We expect the company to update its underlying macro assumptions and give granularity on the evolution of investments, providing comfort on the delivery of the plan. Some changes in L/T capex focus should not be ruled out and we would anticipate: (1) US offshore may gain pace vs. onshore post PTCs-end in 20F, (2) fewer growth opportunities in UK renewables (regulation/Brexit) and (3) a renewed investment cycle in Spanish generation. IBE targeted last year EBITDA/net income of €11.5-12.0/3.5-3.7bn for 22F. We and consensus remain aligned at €11.5/3.7bn and €11.5/3.8bn, respectively. Tailwinds fuelling short term results: With c. 85% of EBITDA coming from

grids and renewables, underlying results volatility is usually linked to weather/pool prices in Spain and FX. 4Q18 earnings should see tailwinds due to positive FX (BRL/USD/GBP vs. EUR +6%/+2%/+1% qoq in Q4), normal hydro conditions vs. very dry 4Q17 (16% LF vs. 7% in 4Q17) and pool prices up 10% yoy. The same trends have been in motion during January, anticipating another good quarter. Model fine-tuning led to 2% EPS upgrade 18-22F, mainly on higher power prices, and resulted in a new YE19 Price Target of €8.50/sh. (+1%).

Discounted valuation despite low-risk growth profile: IBE trades at 14.4x

P/E19F vs. peers at 16.2x despite offering a robust 5% EPS CAGR 17-21F, an attractive 4.8% DY19F (peers at 4.7%) and optionality beyond 23F. A premium is deserved on limited volatility (85% of EBITDA 19F regulated/PPA vs. peers <50%) and growing exposure to markets with attractive fundamentals (US/Brazil). IBE is 3% up YTD but underperforms Stoxx Utils and Iberian peers (both +6%). Increased visibility from upcoming CMD and S/T tailwinds (FX/power prices) should help close the gap. BUY reiterated.

Team leader:

Gonzalo Sanchez-Bordona [email protected]

Phone 34 91 412 1110

Assisted by:

Icíar Iribarren [email protected] Phone 34 91 412 1151

BUYPrev. Buy

Medium Risk

Price Target Previous

Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn) 44,354

Shares Out (mn)

ADV (€ mn) 214.2

Free Float 89%

Múltiples 2018F 2019F 2020F

PE 14.9 14.4 13.4

EV/Sales 2.2 2.1 2.0

EV/EBITDA 9.2 8.7 8.1

EV/EBIT 15.9 15.0 13.9

DY 4.5% 4.8% 4.9%

FCFE Yield (%) 3.0% 0.3% 3.0%

FCFF Yield (%) 0.9% 2.9% 3.1%

PBV 1.2 1.1 1.1


IBE vs. IBEX 35

Source: Bloomberg

6240

€ 8.50€ 8.40

IBE SM / IBE.MC

€ 7.11

€ 5.5 - 7.1

70

80

90

100

110

120

Jan/18 Apr/18 Jul/18 Oct/18

IBE

IBEX35Estimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 31,419 29,215 31,263 38,651 39,697 42,394 42,956

EBITDA (€ mn) 7,306 7,808 7,319 9,198 9,722 10,485 10,821

Margin (%) 23% 27% 23% 24% 24% 25% 25%

NP (€ mn) 2,422 2,715 2,804 3,004 3,080 3,317 3,456

EPS (€) 0.36 0.40 0.44 0.48 0.49 0.53 0.55

DPS (€) 0.11 0.25 0.31 0.32 0.34 0.35 0.38

Capex (€ mn) 3,223 4,265 5,891 6,127 6,289 6,429 5,819

Adj. FCF (€ mn) 3,757 2,511 2,761 797 2,466 2,618 3,521

Net debt (€ mn) 28,292 30,593 33,889 34,558 36,583 37,451 37,477

Net Debt/EBITDA 3.9 3.9 4.6 3.8 3.8 3.6 3.5



IBERDROLA

page 30

INVESTMENT REPORT

February 4, 2019

Iberdrola at a Glance

Breakdown by geography (GW) Breakdown by technology (GW) Load factor (%)

EBITDA by business (18F) EBITDA by unit (18F) EBITDA by geography (18F)

Cash-flow generation (€ bn) Iberdrola's guidance 2018-20/22F vs. BPI

vs. Consensus

Debt snapshot Medium-term maturities (Sep18, € bn)

Source: CaixaBank BPI Equity Research, company data and Bloomberg

0

2

4

6

8

10

12

14

16

18

Spain UK US Mexico Other

Renewables Hydro

Nuclear CCGT

Coal

Thermal39%

Nuclear8%

Renew ables46%

Hydro7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Renewables Hydro

Nuclear CCGT

Coal

Ov erall; 35%

Regulated53%

Non-regulated14%

Semi-regulated

33%

Spain Liber.10%

Spain Reg.19%

Latam Reg.+PPA

17%Renew .

27%

UK13%

US Reg.14%

Others0%

Spain39%

Latam20%

UK17%

USA20%

Others…

(€ bn) IBE BPI Cons.

EBITDA 20F >10 10.5 10.3

Net income 20F 3.3 3.3 3.4

Net debt/EBITDA 20F 3.5 3.5 3.6

EBITDA 22F 11.5-12.0 11.5 11.5

Net income 22F 3.5-3.7 3.7 3.8

Net debt/EBITDA 22F 3.3 3.2 3.3

Capex 18-22F 32.0 30.7 31.2

Dividend payout 65-75% 71% 71%

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2016 2017 2018F 2019F 2020F 2021F

EBITDA - Capex Net financial expense

Tax Dividend

ND/EBITDA

2017 2018F 2019F 2020F 2021F

Net Debt (€ mn) 29,414 32,856 33,525 35,550 36,418

Net Debt/EBITDA 3.8 4.5 3.6 3.7 3.5

Regulatory receivables 241 216 216 216 216

ND/EBITDA ex-R.R. 3.8 4.5 3.6 3.6 3.5

Capex (€ mn) 4,265 5,891 6,127 6,289 6,429

Avg. cost of debt 3.7% 3.3% 4.0% 3.9% 3.9% 0.0

5.0

10.0

15.0

20.0

25.0

2018 2019 2020 2021 2022 2023+

IBERDROLA

page 31

INVESTMENT REPORT

February 4, 2019



BPI estimates/Consensus EBITDA Consensus (€ mn) EPS Consensus (€)

2018 2019 2020

Revenues 8% 7% 10%

EBITDA 1% 1% 2%

EBIT 1% 0% 0%

Net Profit 1% -2% -1%

Net Debt 1% 2% 1%



19Y

20Y

21Y

8500

9000

9500

10000

10500

11000

11500

May-17 Dec-17 Jul-18

19Y

20Y

21Y

0.46

0.48

0.50

0.52

0.54

0.56

0.58

May-17 Dec-17 Jul-18

7.37

8.50

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Consensus BPI


Positive

Neutral

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Jan-17 Jul-17 Jan-18 Jul-18

Price


CAGR

€ mn 2016 2017 2018F 2019F 2020F 2021F 17-21F

Net RAB Spain (€ mn) 8,699 9,702 9,662 9,635 9,590 9,592 -0.3% DCF Assumptions

RAV UK (GBP mn) 6,241 6,493 6,737 6,890 6,972 6,994 1.9% Lib. SP Reg. SP Lib. UK

Rate base US (USD mn) 8,638 9,102 10,046 11,169 12,407 13,415 10.2% Re 10.8% 8.7% 10.2%

Ren. inst. cap. (MW) 14,767 15,982 30,323 30,738 31,971 33,040 19.9% Rf 3.25% 3.25% 3.25%

Pool price (Spain, €/MWh) 40 52 57 62 56 52 0.1% CRP 0.75% 0.75% 0.0%

Wholesale pr. (UK,GBP/MWh) 55 36 68 59 59 61 14.2% Ba 0.65 0.45 0.65

EBITDA 7,808 7,319 9,198 9,722 10,485 10,821 10.3% Be 1.14 0.79 1.16

Generation & Supply 2,253 1,601 1,885 2,079 2,072 2,186 8.1% Mkt premium 6.0% 6.0% 6.0%

Netw orks 3,849 4,228 4,874 5,089 5,556 5,766 8.1% Tax rate 25.0% 25.0% 21.0%

Renew ables 1,500 1,592 2,461 2,574 2,876 2,887 16.0% D/EV 50% 50% 50%

Other 121 39 40 41 42 43 2.5% Rd 5% 5% 4%

Headquarters & Adj. 84 -141 -61 -61 -61 -61 n.s. WACC 7.2% 6.2% 6.9%

Capex 4,265 5,891 6,127 6,289 6,429 5,819 -0.3%

Generation & Supply 732 1,323 1,056 927 711 591 -18.3%

Netw orks 1,845 2,086 2,875 3,077 3,468 3,395 13.0%

Renew ables 1,658 2,380 2,093 2,182 2,148 1,731 -7.6%

Headquarters & Adj. 30 103 103 103 103 103 n.s.


IBERDROLA

page 32

INVESTMENT REPORT

February 4, 2019

Financials


Revenues 31419 29215 31263 38651 39697 42394 42956 8%

EBITDA 7306 7808 7319 9198 9722 10485 10821 10%

EBITDA adj. 7306 7808 7319 9198 9722 10485 10821 10%

EBITDA adj. mg. 23.3% 26.7% 23.4% 23.8% 24.5% 24.7% 25.2% n.s.


EBIT 3829 4554 2713 5337 5662 6086 6301 23%

EBIT adj. 3829 4554 2713 5337 5662 6086 6301 23%

Net financial results -1023 -903 -937 -1158 -1280 -1307 -1327 9%

Income tax 527 905 -1397 905 1013 1105 1152 n.s.

Others 125 48 279 23 0 0 0 n.s.

Minority Interests -38 -138 -366 -299 -311 -381 -400 n.s.


Net Profit adj. 2261 2532 2749 2986 3080 3317 3456 6% Source: CaixaBank BPI Equity Research.

CAGR Valuation Summary2015 2016 2017 2018F 2019F 2020F 2021F 17-21F € mn % EV % Chg

Net Intangibles 20760 19934 21148 21148 21148 21148 21148 0% Gen.&Supply -ES (DCF) 9208 10% 2%

Net Fix ed Assets 62885 65183 65345 66618 69847 71876 73176 3% Gen.&Supply -UK (DCF) 1492 2% -3%

Net Financials 2200 2348 1885 1185 1223 1265 1324 -8% Gen.&Supply -MX (DCF) 5646 6% -1%

Inv entories 1797 1634 1870 2251 2288 2429 2425 7% Gen.&Supply -BR (DCF) 1036 1% 9%

ST Receiv ables 6048 5862 6721 7837 8161 8775 9066 8% Netw orks-Spain (DCF) 18070 19% -1%

Other Assets 9821 10312 10522 11179 11796 11956 11430 2% Netw orks-UK (adj. RAV) 8372 9% 0%

Cash & Equiv alents 1153 1433 3197 3197 3197 3197 3197 0% Netw orks-US (DCF) 12711 14% -4%

Total Assets 104664 106706 110689 113415 117660 120647 121767 2% Netw orks-Brazil (DCF) 7792 8% 11%

Equity & Minorities 40956 40688 42733 43683 45459 47114 48190 3% Renew ables (DCF) 27420 29% 1%

MLT Liabilities 49119 51944 51230 51899 53924 54792 54818 2% Non-energy business 1914 2% 0%

o.w . Debt 23783 26622 29576 30246 32271 33139 33165 3% Total EV 93662 100% 1%

ST Liabilities 14589 14075 16726 17833 18277 18741 18759 3% Adj. ND (YE19F) -35550 0%

o.w . Debt 5662 5404 7510 7510 7510 7510 7510 0% Regulatory items 216 0%

o.w . Pay ables 0 0 0 0 0 0 0 n.s. SGRE (8.1% stake) 684 6%

Equity+Min. + Liabilities 104664 106706 110689 113415 117660 120647 121767 2% Others financials 4164 1%

Pension & prov . -4181 0%

TEI -47 0%

2015 2016 2017 2018F 2019F 2020F 2021F Minorities -5,911 -2%

+ EBITDA 7306 7808 7319 9198 9722 10485 10821 Equity value 53038 1%

- Chg in Net W.C. -45 20 -527 -2070 84 -291 -269 # shares (mn) 6240 0%

- Income Tax es -527 -905 1397 -905 -1013 -1105 -1152 YE19 P. Target (€) 8.50 1%

= Operating Cash Flow 6734 6923 8189 6224 8793 9089 9400 Source: CaixaBank BPI Equity Research.

- Grow th Capex 0 -1011 -1285 -2266 -2228 -2030 -1300

- Replacement Capex -3223 -3254 -4606 -3861 -4060 -4399 -4520 DCF Assumptions- Net Fin. Inv . 246 -148 463 700 -38 -42 -59 Lib. ES Dis.ES Lib. UK

= Cash Flow after Inv. 3757 2511 2761 797 2466 2618 3521 Re 10.8% 8.7% 10.2%

- Net Fin. Ex p. -1023 -903 -937 -1158 -1280 -1307 -1327 Rf 3.25% 3.25% 3.25%

- Div idends Paid -302 -779 -1972 -1997 -2140 -2193 -2362 CRP 0.8% 0.8% 0.0%

+/- Equity -38 19 -34 0 0 0 0 Beta Equity 1.1 0.8 1.2

Other -4842 -2195 -3259 1688 -1072 14 141 Mkt Premium 6.0% 6.0% 6.0%

=Change in Net Debt 2448 1347 3442 669 2025 868 26 Tax rate 25% 25% 21%

Net Debt (+)/Net Cash (-) 28067 29414 32856 33525 35550 36418 36444 D/EV 50% 50% 50%

Rd 5% 5% 4%

Growth, per share WACC 7.2% 6.2% 6.9%

2015 2016 2017 2018F 2019F 2020F 2021F ROIC 7.2% 6.2% 6.9%

Sales grow th 5% -7% 7% 24% 3% 7% 1% Source: CaixaBank BPI Equity Research.

EBITDA Adj. grow th 5% 7% -6% 26% 6% 8% 3%

EPS Adj. grow th 6% 12% 9% 10% 3% 8% 4% IBE valuation sensitivity to CRP in Av g. # sh (mn) 6363 6349 6301 6240 6240 6240 6240 Iberia and FX ( in €/sh.)Basic EPS 0.38 0.43 0.45 0.48 0.49 0.53 0.55

EPS Adj. Fully diluted 0.36 0.40 0.44 0.48 0.49 0.53 0.55

DPS 0.11 0.25 0.31 0.32 0.34 0.35 0.38

Pay out 73.6% 72.5% 71.9% 71.2% 71.2% 71.2% 71.2%

ROCE (after tax ) 5.9% 6.0% 8.0% 6.5% 6.6% 6.8% 6.8%

ROE 6.3% 6.7% 6.7% 7.0% 6.9% 7.2% 7.3%

Gearing (ND/EV) 25.8% 28.4% 29.2% 27.5% 28.6% 29.1% 29.1%

Net Debt/EBITDA 3.8x 3.8x 4.5x 3.6x 3.7x 3.5x 3.4x

Source: CaixaBank BPI Equity Research.Source: Company data, CaixaBank BPI Equity Research.

P&L (€ mn)


Cash flow (€ mn)

QIA6.2%

Blackrock5.1%

Norges Bank3.1%

Other85.6%

+0.72

-0.18-0.44

-0.01

-0.54

+0.22

+0.54

+0.02

+/- 1%

Spanish

CRP

+/- 10%

EUR /USD

+/- 10%

EUR /GBP

+/- 10%

EUR /BRL



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Equity

Company Report

INDITEX APPAREL / Spain

04 Feb. 19 (06:00) (1)


GLOBAL Leader

Inditex is on the path of becoming truly global after Zara having reached 202 markets. Future lower growth rates are a function of the co.’s size, ROIC should move upwards

Store-channel is not dead: This channel sales has been growing at lower

rates but it is still growing (with the exception of the UK market). We think there is a misconception in the market that this channel is losing sales. Having said this, it should be critical for store-based retailers (Inditex included) to deal with cannibalization issues which could imply lower selling area in the future. Ecommerce to grow faster: Prospects continue to favor ecommerce

(convenience) but the big disruption is done already, we believe. Mobile penetration created this big push (from 2014) and now it should evolve in line with younger generations (market share growth is expected to decelerate). Still, store-based retailers have been picking up on this new online trend and we think that this may pressure pure online players sooner rather than later. Inditex’s growth prospects remain solid. The company’s lower rates in the

future is a function of its scale. Store-based + online prospects for Inditex remain rather similar to historical references. Moreover, despite being the world’s largest apparel retailer, its market share per country remains limited which reduces cannibalization issues. Future growth will be driven by online which is less capex intensive and therefore despite the lower growth rates, it should witness an improving ROIC. Price Target cut to €31.70 (-2%), Buy reiterated: We are factoring-in lower

selling area evolution as we think Inditex will favour online over stores while visibility on its new geographies (Africa + LatAm) is still limited. Investors have been questioning Inditex’s current valuation but future growth should be more accretive (higher margins/lower capex). It trades at 19.4x PE19 (22x historically) while its valuation vs. world consumer leaders remains affordable for the upcoming expected growth. Q4 results, possible new guidance for H1 and improving FX trends should be seen as catalyst for the stock. BUY.

Team leader


Phone 351 22 607 3142

Guilherme Macedo Sampaio, CFA [email protected] Phone 351 22 607 3179

BUY Prev. Buy

Low Risk


Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float


PE 21.4 19.4 17.9

EV/Sales 2.6 2.4 2.3

EV/EBITDA 12.3 11.2 10.4

EV/EBIT 15.4 13.9 12.9

DY 3.1% 3.3% 3.7%

FCFE Yield (%) 3.7% 4.9% 5.4%

FCFF Yield (%) 5.7% 6.2% 6.7%

PBV 5.1 4.7 4.3

Source: Bloomberg, CaixaBank BPI ER.

ITX vs. IBEX Index

Source: Bloomberg

3116.7

€ 31.70€ 32.30

ITX SM / ITX.MC

€ 24.11

€ 22.1 - 29.6

75,142

273.6

34%

70

80

90

100

110

Feb-18 Aug-18 Jan-19

ITX

IBEX Index

Estimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 20,900 23,311 25,336 26,323 28,360 30,135 31,975

EBITDA (€ mn) 4,699 5,083 5,278 5,550 6,104 6,552 7,004

Margin (%) 22.5% 21.8% 20.8% 21.1% 21.5% 21.7% 21.9%

NP (€ mn) 2,875 3,157 3,368 3,503 3,864 4,193 4,515

EPS (€) 0.92 1.01 1.08 1.12 1.24 1.35 1.45

DPS (€) 0.52 0.60 0.68 0.75 0.79 0.89 1.01

Capex (€ mn) 1,542 1,432 1,801 1,463 1,452 1,506 1,547

Adj. FCF (€ mn) 3,864 3,565 3,306 3,884 4,253 4,547 4,841

Net debt (€ mn) -5,300 -6,091 -6,387 -6,820 -8,085 -9,323 -10,528

Net Debt/EBITDA -1.1 -1.2 -1.2 -1.2 -1.3 -1.4 -1.5



INDITEX

page 34

INVESTMENT REPORT

February 4, 2019

Inditex at a Glance

Sales growth breakdown

FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F FY21F

Sales growth 15.6% 4.9% 8.3% 15.4% 11.5% 8.7% 3.9% 7.7% 6.3% 6.1%

LfL 6.0% 2.8% 4.8% 8.5% 10.0% 5.1% 3.7% 4.5% 4.5% 4.5%

Space contribution 8.0% 5.4% 7.0% 6.4% 4.5% 4.9% 3.4% 3.3% 2.9% 2.6%

Fx impact 1.6% -3.3% -2.5% 0.4% -3.0% -1.4% -3.4% 0.0% -1.0% -1.0%

Source: ITX, CaixaBank BPI Equity Research.

Inditex's FY17 sales per region (€25.3bn) Inditex's FY21F sales per region (€32.0bn)

Gross margin evolution Room for shareholder remuneration improvement

Inditex' FY17 sales by concept (€25.3bn) EPS 2018-20F CAGR

Spain16%

Europe (ex-Spain)

43%

Asia and ROW

25%

Americas16%

Spain11%

Europe (ex-Spain)

40%

Asia and ROW

29%

Americas20%

50%

52%

54%

56%

58%

60%

62%

FY11 FY13 FY15 FY17F FY19F FY21F

0

1,500

3,000

4,500

FY18F FY19F FY20F FY21F

Dividends paid Available CF

(€ mn)

Zara66%

P&B7%

MD7%

Bershka9%

Stradivarius6%

Oysho2%

ZH3%

Uterque0%

-2%

17%

3%

6%

9%

-6% -1% 4% 9% 14% 19%

M&S

Fast Retailling

GAP

H&M

ITX

INDITEX

page 35

INVESTMENT REPORT

February 4, 2019




2018 2019 2020

Revenues 1% 1% -2%

EBITDA 1% 1% 0%

EBIT 0% 0% 1%

Net Profit 0% 2% 2%

Net Cash -3% 0% 0%



5500

6000

6500

7000

7500

May-17 Mar-18 Dec-18

FY20

FY21

1.05

1.20

1.35

1.50

1.65


FY19

FY20FY21

29.5131.70

0.0

10.0

20.0

30.0

40.0

Consensus BPI


Positive56%

Negative7%

Neutral37%

20.0

24.0

28.0

32.0

36.0

40.0

Jan-17 Jan-18 Dec-18

Price


FY19

2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F

Sales (€ mn) 16,724 18,117 20,900 23,311 25,336 26,323 28,360 30,135 31,975 34,026 36,356

Selling Area (th sqm) 3,442 3,786 4,087 4,411 4,739 4,996 5,238 5,455 5,672 5,888 6,069

Selling Area grow th 8.87% 10.00% 7.94% 7.93% 7.45% 5.41% 4.85% 4.15% 3.96% 3.81% 3.09%

Nr of stores 6,340 6,683 7,013 7,292 7,475 7,730 7,960 8,190 8,425 8,660 8,870

Europe 7,676 8,334 9,196 10,234 11,376 11,626 12,150 12,473 12,710 12,994 13,344

LFL 2.00% 4.00% 7.00% 9.50% 3.50% 2.50% 2.00% 1.80% 1.50% 1.50% 1.50%

Selling Area (th sqm) 1,478 1,648 1,779 1,930 2,096 2,214 2,327 2,422 2,502 2,581 2,652

Nr of stores 2,723 2,909 3,053 3,190 3,306 3,426 3,536 3,636 3,716 3,796 3,876

Spain 3,295 3,442 3,699 3,940 4,130 3,959 3,861 3,719 3,617 3,528 3,445

LFL -1.50% 4.50% 8.00% 6.50% 4.50% 1.00% 2.00% 1.50% 1.00% 1.00% 1.00%

Selling Area (th sqm) 1,009 1,032 1,064 1,081 1,070 1,062 1,022 985 965 944 916

Nr of stores 1,858 1,822 1,826 1,787 1,688 1,643 1,553 1,478 1,433 1,388 1,338

Asia and Africa 3,412 3,823 4,912 5,571 5,878 6,410 7,390 8,369 9,346 10,352 11,480

LFL 8.10% 7.00% 9.00% 10.50% 4.50% 6.80% 8.30% 8.30% 8.30% 7.60% 7.40%

Selling Area (th sqm) 657 758 846 951 1,063 1,161 1,287 1,410 1,512 1,609 1,701

Nr of stores 1,211 1,338 1,452 1,572 1,676 1,796 1,956 2,116 2,246 2,366 2,486

Americas 2,341 2,518 3,072 3,567 3,952 4,328 4,958 5,575 6,302 7,152 8,087

LFL 4.00% 4.50% 13.00% 14.80% 11.50% 5.00% 7.00% 7.00% 7.00% 7.00% 7.00%


INDITEX

page 36

INVESTMENT REPORT

February 4, 2019

Financials

CAGR Shareholder structure2015 2016 2017 2018

F2019

F2020

F2021

F17-21

F

Revenues 20900 23311 25336 26323 28360 30135 31975 6%

EBITDA 4699 5083 5278 5550 6104 6552 7004 7%

EBITDA adj. 4699 5083 5278 5550 6104 6552 7004 7%

EBITDA adj. mg. 22.5% 21.8% 20.8% 21.1% 21.5% 21.7% 21.9%


EBIT 3677 4021 4315 4419 4901 5301 5709 7%

EBIT adj. 3677 4021 4315 4419 4901 5301 5709 7%

Net financial results 10 10 -5 13 15 35 40 n.s.

Income tax 861 917 979 967 1091 1184 1275 7%

Others 56 48 42 44 45 47 48 3%



Net Profit adj. 2875 3157 3368 3503 3864 4193 4515 8% Source: ITX.

CAGR DCF Assumptions2015 2016 2017 2018

F2019

F2020

F2021

F17-21

F

Net Intangibles 888 911 919 919 919 919 919 0% Re

Net Fix ed Assets 6619 7305 7664 7996 8245 8500 8753 3% Rf

Net Financials 184 231 237 281 326 373 422 15% CRP

Inv entories 2195 2549 2685 2680 2888 3069 3256 5% Beta Equity

ST Receiv ables 669 861 778 938 1010 1073 1139 10% Mkt Premium

Other Assets 1491 1612 1546 1796 1796 1796 1796 4% Rd

Cash & Equiv alents 5311 6153 6403 6836 8101 9339 10544 13% D/EV

Total Assets 17357 19622 20232 21445 23284 25069 26828 7% Tax rate

Equity & Minorities 11451 12752 13522 14693 16110 17527 18905 9% WACC

MLT Liabilities 1236 1419 1536 1286 1286 1286 1286 -4% g

o.w . Debt 1 0 4 4 4 4 4 0% Source: CaixaBank BPI Equity Research.

ST Liabilities 4670 5451 5174 5466 5888 6256 6637 6%

o.w . Debt 10 62 12 12 12 12 12 0% Sensitivity Analysis to LfL (1)o.w . Pay ables 4660 5389 5162 5454 5876 6244 6625 6% Av erage LfL YE19

F Fair Value

Equity+Min. + Liabilities 17357 19622 20232 21445 23284 25069 26828 7% 2.6% 26.80

3.4% 28.80

3.9% 30.20

2015 2016 2017 2018F

2019F

2020F

2021F 4.4% 31.70

+ EBITDA 4699 5083 5278 5550 6104 6552 7004 4.9% 33.20

- Chg in Net W.C. -777 -183 280 -137 -142 -124 -128 5.4% 34.90

- Income Tax es 861 917 979 967 1091 1184 1275 5.9% 36.60

= Operating Cash Flow 4615 4349 4019 4720 5154 5492 5856 (1) 2018-30 avg.. Source: CaixaBank BPI ER.

- Grow th Capex 776 635 1079 615 538 543 511


- Net Fin. Inv . -23 -1 -36 0 0 0 0

= Cash Flow after Inv. 3096 2918 2254 3258 3702 3986 4310 Change in Estimates- Net Fin. Ex p. -10 -10 5 -13 -15 -35 -40

- Div idends Paid 1621 1870 2119 2337 2452 2782 3145 2018 2019 2020

+/- Equity 0 0 0 0 0 0 0 Rev enues 0% -1% -1%

Other -195 -267 167 -500 0 0 0 EBITDA 0% 0% -1%

=Change in Net Debt -1290 -791 -296 -433 -1265 -1238 -1205 Net Profit 0% 0% -1%

Net Debt (+)/Net Cash (-) -5300 -6091 -6387 -6820 -8085 -9323 -10528 Net Cash 0% 0% 0%


2015 2016 2017 2018F

2019F

2020F

2021F

Sales grow th 15% 12% 9% 4% 8% 6% 6%

EBITDA Adj. grow th 15% 8% 4% 5% 10% 7% 7% Valuation Summary (€ mn)EPS Adj. grow th 15% 10% 7% 4% 10% 9% 8% New Chg

Av g. # sh (mn) 3116.7 3116.7 3116.7 3116.7 3116.7 3116.7 3116.7 EV 89,536 -2%

Basic EPS 0.92 1.01 1.08 1.12 1.24 1.35 1.45 50% of Tempe (1) 862 -2%

EPS Adj. Fully diluted 0.92 1.01 1.08 1.12 1.24 1.35 1.45 Net cash YE19 8,085 0%

DPS 0.52 0.60 0.68 0.75 0.79 0.89 1.01 Treasury shares 288 -4%

Pay out 65.1% 67.1% 69.4% 70.0% 72.0% 75.0% 75.0% Minority Interests -30 1%

ROCE (after tax ) 20.3% 20.7% 20.4% 20.0% 20.5% 20.9% 21.3% Equity -2%

ROE 26.3% 26.2% 25.7% 24.9% 25.1% 25.0% 24.8% # shares (mn) 3116.7

Gearing (ND/EV) -7.8% -8.9% -9.4% -10.0% -11.9% -13.7% -15.4% YE19 Price Target (€) 31.70 -2%

Net Debt/EBITDA -1.1x -1.2x -1.2x -1.2x -1.3x -1.4x -1.5x (1) 30% disc. to implied PE.


2.5%

P&L (€ mn)


0.78%

0.8

6.0%

5.0%

0.0%

23.0%

8.7%

8.7%

3.25%

Cash flow (€ mn)


Source: Company data, CaixaBank BPI Equity Research.

98,741

Amancio Ortega, 59%

Rosp Corunna, 5%

Other, 36%



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INDRA IT / Spain

04 Feb. 19 (06:00) (1)


Improving outlook

Revenue growth to accelerate in 2019 and 2020 and boost FCF generation

Acceleration in revenue growth: Indra (IDR) will likely close 2018 with

revenues up 0.7%/+€21mn despite the decline in the Eurofighter program (-€70mn), the tough comparables in the elections business (-€90mn) and FX negative impact (-€65mn in the 9M) partially offset by the contribution of Paradigma (acquired in Jan18) and Tecnocom (Apr17). Considering the underlying trend (we estimate over 2% organic growth in Q3 and order intake has been up 5% yoy in the 9M) we see room for revenues to accelerate materially. We estimate +3.7%/3.8% revenue growth for 2019/20, including the US-based Advanced Control Systems (ACS) from Oct18 (€38mn rev.?). Estimates consistent with 2020 targets: IDR provided last year targets for

2020 including: i) low single CAGR16-20 revenue growth ex-Tecnocom (1.1% in our numbers); ii) EBIT CAGR16-20 above 10% (+10.6%); iii) cumulative CF ex-capex and restructuring in 2018-20 between €550-650mn (€652mn); iv) cumulative capex in 2018-20 between €150-200mn (€190mn). CF generation continues to be a cornerstone of the investment case:

IDR’s new management has been able to mitigate most of the business problems with hefty FCF delivery. 2018 FCF is being penalized by €66mn non-recurrent cash outflows (CNMC €13.5mn fine and restructure/integration related payments among others) and ACS unit acquisition (€40mn) but for 2019 and 2020 we anticipate high-single to double digit FCF yields. YE19 Price Target cut to €12.40 (-4%); Keeping the call: We have fine-

tuned our valuation, with minor changes in estimates (average EPS 18-20 down by 4%). A positive outlook in top line and a material operational leverage should drive FCF growth. We maintain our positive stance as we believe that the upcoming FY18 results and possible guidance announcement are likely to be a powerful trigger for the stock. BUY.

Team leader:

Pedro Oliveira [email protected]

Phone 351 22 607 3194

BUYPrev. Buy

Medium Risk

Target PricePrevious

Company Profile

Bloomberg/Reuters

Close Price at 19-Nov

52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float

Ratios 2018F

2019F

2020F

PE 11.1 10.3 9.3

EV/Sales 0.8 0.8 0.7

EV/EBITDA 7.3 7.1 6.8

EV/EBIT 10.0 9.7 9.0

DY 0.0% 4.0% 5.5%

FCFE Yield (%) 1.4% 8.5% 10.4%

FCFF Yield (%) 3.3% 7.0% 8.2%

PBV 2.1 1.8 1.6

Source: Bloomberg, CaixaBank BPI ER

Indra vs. IBEX

Source: B loomberg

176.7

7.2

71%

€ 12.40€ 12.90

IDR.MC / IDR SM

€ 8.98

€ 8.1 - 12.2

1,585

60

70

80

90

100

110

120

130

140

Nov/17 Feb/18 May/18 Aug/18

IDRIbexEstimates 2015 2016 2017 2018

F2019

F2020

F2021

F

Sales (€ mn) 2 850 2 709 3 011 3 032 3 143 3 263 3 353

EBITDA (€ mn) -556 229 266 292 320 343 356

Margin (%) -20% 8% 9% 10% 10% 11% 11%

NP (€ mn) -641 70 127 114 140 159 170

EPS (€) -0.10 0.43 0.73 0.81 0.87 0.96 1.02

DPS (€) 0.00 0.00 0.00 0.00 0.36 0.50 0.77

Capex (€ mn) -18 32 469 73 59 60 61

Adj. FCF (€ mn) -354 -12 -267 81 170 200 223

Net debt (€ mn) 700 523 588 565 431 330 229

Net Debt/EBITDA -1.3 2.3 2.2 1.9 1.3 1.0 0.6



INDRA

page 38

INVESTMENT REPORT

February 4, 2019

Indra at a Glance

Revenues €mn and EBITDA margin % evolution Revenue Breakdown Division Evolution

Revenue Breakdown by International Exposure Evolution Revenue 2017 breakdown per Business Areas

DPS paid evolution (Eur) Net Debt & Net debt/EBITDA Evolution

Source: Company data & CaixaBank BPI Equity Research.

Indra is a global technology and consulting company and also a technological partner for core business operations

of its customers world-wide. It provides proprietary solutions in specific segments in Transport and Defence markets,

and the leading firm in Digital Transformation Consultancy and Information Technologies in Spain and Latin America

through its affiliate Minsait. In the 2017 financial year, Indra achieved revenue of € 3 011bn, with 40,000 employees,

a local presence in 46 countries and business operations in over 140 countries.

5.4x

2.3x

2.2x1.7x

1.3x

0.9x

0.6x

2015 2016 2017 2018F 2019F 2020F 2021F

0

100

200

300

400

500

600

700

800

0.34 0.34 0.36

0.50

0.77

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

2013 2015 2017 2019F 2021F

38% 38% 41% 45% 39% 38% 39%

62% 62% 59% 55% 61% 62% 61%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019

Technology IT

Energy & Industry

16%

Financial

Services20%

Telecom &

Media8%

Healthcare &

PPAA17%

Transport

& Traffic19%

Defence &

Security 20%

39% 39% 43% 43% 46% 51% 50% 50%

61% 61% 57% 57% 54% 49% 50% 50%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020

Domestic Revenues International Revenues

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

2,000

2,250

2,500

2,750

3,000

3,250

3,500

€ mn

INDRA

page 39

INVESTMENT REPORT

February 4, 2019




2018 2019 2020

Revenues -0.1% 0.5% 0.3%

EBITDA -3.1% -2.7% -2.0%

EBIT 17% 6% 4%

Net Profit -8% -7% -6%

Net Debt 2% -1% 6%

Capex 5% 0% -2%



18Y

19Y

20Y

200

250

300

350

400

450

Nov-17 Mar-18 Jul-18 Nov-18

18Y

19Y 20Y

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20


12.42 12.40

0

2

4

6

8

10

12

14

Consensus BPI


Positive

Negative

Neutral

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0


Price


€ mn 2015 2016 2017 2018F 2019F 2020F 2021F 2022F

Revenues 2850 2709 3011 3032 3143 3263 3353 3450

Technology 1175 1224 1183 1153 1234 1320 1376 1434

IT 1675 1485 1828 1879 1909 1943 1977 2016

Contribution margin 263 378 482 504 528 555 576 598

Technology 133 233 224 231 251 271 284 297

IT 129 145 258 272 277 285 293 301

Contribution margin % 9.2% 14.0% 16.0% 16.6% 16.8% 17.0% 17.2% 17.3%

EBITDA (recurrent) 131 229 269 333 340 358 371 384

EBITDA mg % 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6%

Depreciation 85 68 71 91 90 89 87 78

EBIT (recurrent) 45 162 199 242 250 269 284 306

EBIT mg % 1.6% 6.0% 6.6% 8.0% 8.0% 8.3% 8.5% 8.9%


INDRA

page 40

INVESTMENT REPORT

February 4, 2019

Financials


Revenues 2850 2709 3011 3032 3143 3263 3353 3%

EBITDA -556 229 266 292 320 343 356 8%

EBITDA adj. 131 229 269 333 340 358 371 8%

EBITDA adj. mg. 4.6% 8.5% 8.9% 11.0% 10.8% 11.0% 11.1%


EBIT -641 162 196 201 230 254 269 8%

EBIT adj. 45 162 199 242 250 269 284 9%


Income tax -64 54 34 50 54 59 63 9%

Others -687 0 -3 -41 -20 -15 -15 n.s.

Minority Interests -1 0 2 2 1 1 1 25%

Net Profit reported -641 70 127 114 140 159 170 8%

Net Profit adj. -17 70 120 143 154 170 181 11% Source: CNMV.

CAGR 2017 Revenue breakdown2015 2016 2017 2018F 2019F 2020F 2021F 17-21F

Net Intangibles 760 757 1155 1152 1136 1121 1107 -1%

Net Fix ed Assets 137 103 104 89 74 60 48 -18%

Net Financials 50 185 232 272 272 272 272 4%

Inv entories 225 217 241 218 226 235 241 0%

ST Receiv ables 1237 1055 1081 1152 1229 1302 1355 6%

Other Assets 313 341 353 338 322 304 285 -5%

Cash & Equiv alents 342 674 699 629 598 568 539 -6%

Total Assets 3063 3332 3867 3851 3857 3862 3848 0%

Equity & Minorities 308 378 649 765 907 1004 1087 14%

MLT Liabilities 1107 1346 1244 919 706 506 387 -25%

o.w . Debt 962 1136 1016 711 498 299 179 -35%

ST Liabilities 1648 1608 1974 2167 2245 2352 2375 5% Source: Indra

o.w . Debt 79 61 271 483 531 599 590 21%

o.w . Pay ables 260 247 274 276 286 297 305 3% Valuation Summary (€ mn)Equity+Min. + Liabilities 3063 3332 3867 3851 3857 3862 3848 0%

EV 2 765

- Net Debt YE19 431

2015 2016 2017 2018F 2019F 2020F 2021F - Factoring 187

+ EBITDA -556 229 266 292 320 343 356 + Value FI-MI 44

- Chg in Net W.C. -151 68 -36 48 54 42 27 Equity Value 2 192

- Income Tax es 7 7 53 50 38 41 44 # shares (mn) 176.7

= Operating Cash Flow -412 155 249 194 228 260 285 YE19 Price Target (€) 12.40

- Grow th Capex -18 32 469 73 59 60 61 Source: CaixaBank BPI Equity Research.


- Net Fin. Inv . -39 135 47 40 0 0 0

= Cash Flow after Inv. -354 -12 -267 81 170 200 223 DCF Assumptions- Net Fin. Ex p. 65 37 33 35 35 35 35

- Div idends Paid 0 0 0 0 0 63 88 Re 10.4%

+/- Equity 0 0 0 0 0 0 0 Rf 3.25%

Other 382 226 235 -24 0 0 0 CRP 1.32%

=Change in Net Debt 37 -177 65 -23 -134 -102 -100 Beta Equity 1.0

Net Debt (+)/Net Cash (-) 700 523 588 565 431 330 229 Mkt Premium 6.0%

Rd 5.0%

D/EV 20%

2015 2016 2017 2018F 2019F 2020F 2021F Tax rate 25%

Sales grow th n.s n.s 11% 1% 4% 4% 3% WACC 9.1%

EBITDA Adj. grow th n.s n.s 17% 24% 2% 5% 4% Perp. EBIT Margin 9.0%

EPS Adj. grow th n.s n.s 72% 11% 8% 10% 6% Source: CaixaBank BPI Equity Research.

Av g. # sh (mn) 164.1 164.1 164.1 176.7 176.7 176.7 176.7

Basic EPS -3.91 0.43 0.72 0.65 0.79 0.90 0.96 Fair Value Sensitivity (€/sh)EPS Adj. Fully diluted -0.10 0.43 0.73 0.81 0.87 0.96 1.02

DPS 0.00 0.00 0.00 0.00 0.36 0.50 0.77 Δ EBIT Margin

Pay out 0.0% 0.0% 0.0% 54.8% 62.8% 55.3% 51.7% Risk Free -2% 0% 2%

ROCE (after tax ) 3.2% 9.8% 14.9% 13.4% 13.8% 15.0% 15.9% -1% 12.00 15.00 18.00

ROE -104% 21.2% 25.5% 16.6% 17.2% 17.0% 16.6% 0% 10.00 12.40 14.90

Gearing (ND/EV) 30.2% 22.6% 25.4% 23.3% 17.8% 13.6% 9.4% +1% 8.40 10.40 12.50

Net Debt/EBITDA 5.4x 2.3x 2.2x 1.7x 1.3x 0.9x 0.6x Source: CaixaBank BPI Equity Research.


P&L (€ mn)

Cash flow (€ mn)


Δ Rf

+CRP


SEPI19%

Corp. Alba11%

Fidelity9%

T. Row e Price5%Norges B.

4%

Other53%

Spain46%

America22%

Europe16%

AMEA16%



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JERÓNIMO MARTINS RETAIL / Portugal

04 Feb. 19 (06:00) (1)


Colombia to be an important driver

Polish operation is key to the IC, but apart from the trading ban (external factor), backdrop remains solid (macro, competition). Colombia to drive EPS and re-rating

Trading update showing solid figures. JM released a trading update with

LfL standing at 1.2% in Poland (in line) and 2.8% in Portugal (1.5%F) in Q4. Expectations were quite subdued as the stock has re-rated post the release (20% YTD vs. 11% for the Estoxx Retail). Despite the negative impact from the trading ban in Poland (-1.3% in JM’s LfL in FY18), profitability has been broadly flat and there are no indications this could change in Q4 or in 2019. Safe Poland: The Polish competitive backdrop has not deteriorated and

macro prospects remain solid even if some slowdown is expected in 2019 (3.8% GDP growth vs. 5.1% in 2018). This will be a government election year which is usually good from a consumer perspective and some speculations have been raised that the government may ease the trading ban conditions (14 days in 2019 vs. 21 in 2018). 2019 industry's sales should grow in line with 2018 and JM's LfL should stand at 2.7% (flat yoy). Given the industry's headwinds in 2019 (opex and ban), we do not envisage a spike in competition. Colombia: an important trigger in 2019. We have been seeing a

stabilization on the company's losses while JM has been able to increase gross margins in this market. We expect scale to continue to drive gross margins up and losses to materially decline in 2019 (€53mn vs. €72mnF in 2018; breakeven by 2021). This should be key for EPS evolution and to reassure the market about the LT rational of this geography. YE19 Price Target cut to €15.75 (-1%), Buy. Despite the recent sh. price

performance, JM remains a clear underperformer (-25% LTM vs. 0% for the Estoxx retail). Q1 should be difficult (negative LfL in Poland; seasonality of Easter) but fears of a margin de-rating should not be confirmed given the current competition “status quo” in Poland. JM trades at a 17.6x PE19 (14.6x ex-Colombia) vs. 2Y average of 20.6x and 16.8x for the European peers. BUY

Team leader


Phone 351 22 607 3142

Guilherme Macedo Sampaio, CFA [email protected] Phone 351 22 607 3179

BUY Prev. Buy

Medium Risk


Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float


PE 19.3 17.6 15.7

EV/Sales 0.5 0.5 0.5

EV/EBITDA 9.2 8.6 7.9

EV/EBIT 14.6 13.6 12.3

DY 4.9% 5.1% 5.7%

FCFE Yield (%) 1.2% 3.1% 4.3%

FCFF Yield (%) 5.6% 7.2% 8.5%

PBV 4.3 4.2 4.1


JMT vs. PSI20

Source: Bloomberg

€ 15.75€ 15.85

22.1

39%

JMT PL / JMT.LS

€ 12.45

€ 10.1 - 16.8

7,835

629.3

60

70

80

90

100

110

120

Feb-18 Jul-18 Jan-19

JMT

PSI20

Estimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 13,728 14,622 16,276 17,337 18,135 19,093 20,119

EBITDA (€ mn) 800 862 922 973 1,039 1,133 1,204

Margin (%) 5.8% 5.9% 5.7% 5.6% 5.7% 5.9% 6.0%

NP (€ mn) 333 593 385 399 444 500 534

EPS (€) 0.53 0.94 0.61 0.63 0.71 0.79 0.85

DPS (€) 0.62 0.26 0.60 0.61 0.63 0.71 0.79

Capex (€ mn) 415 405 806 723 720 730 696

Adj. FCF (€ mn) 692 695 655 499 641 756 818

Net debt (€ mn) 187 -335 -170 120 274 381 435

Net Debt/EBITDA 0.2 -0.4 -0.2 0.1 0.3 0.3 0.4



JERÓNIMO MARTINS

page 42

INVESTMENT REPORT

February 4, 2019

Jerónimo Martins at a Glance

FY17 Sales Breakdown (€16.3bn) FY17 EBITDA Breakdown (€922mn)

LfL Performance vs. Food Sales: Poland (YoY, %) LfL Performance vs. Food Sales: Portugal (YoY, %)

FMCG mkt share - Portugal Retail market share - Poland

JM Share price vs. EUR/PLN Biedronka's new openings evolution

Source: JMT, INE, Nielsen, Polish Statistical Office, Tesco; GFK, MAT, Till Roll Food, Bloomberg, CaixaBank BPI ER.

Sonae22%

JM21%

ITM9%

Lidl9%

Auchan9%

Minipreço4%

Others26%

Biedronka68%

Pingo Doce -s.sales

23%

Recheio6%

Ara2%

Others and Adjust.1%

805922

238-122

0

200

400

600

800

1,000

Biedronka RetailPortugal

Others Total

-4.0

1.0

6.0

11.0

16.0

4Q13 4Q14 4Q15 4Q16 4Q17 4Q18

JM

Food sales

-6.0

0.0

6.0

12.0

4Q13 4Q14 4Q15 4Q16 4Q17 4Q18

JM

Food sales

Biedronka22%

Tesco5%

Carrefour3%

Lidl6%

Auchan4%

Kaufland5%

Metro3%

Zabka3%

ITM2%

Others47%

8

12

16

3.9

4.2

4.5

Feb-17 Jun-17 Oct-17 Jan-18 May-18 Sep-18 Jan-19

€€/Pln

JM

Eur/PLN

194

80 55

10177 80 80

1,000

2,000

3,000

4,000

0

100

200

2014 2015 2016 2017 2018 2019F 2020F

New Openings Total Stores

JERÓNIMO MARTINS

page 43

INVESTMENT REPORT

February 4, 2019




2018 2019 2020

Revenues 0% 0% -1%

EBITDA 0% 1% 1%

EBIT 17% 0% 0%

Net Profit -1% 1% 3%

Net Debt n.s. n.s. n.s.



1000

1100

1200

1300


FY20

FY21

0.65

0.75

0.85

0.95

1.05


FY19

FY20

FY21

14.1815.75

0.0

5.0

10.0

15.0

20.0

Consensus BPI


Positive35%

Negative18%

Neutral47%

10.0

12.0

14.0

16.0

18.0

Feb-17 Jan-18 Dec-18

Price


FY19

2018 2019F 2020F 2021F

Poland Poland Retail C&C Colombia

Sales (€ mn) 11691 12170 12734 13283 Re 9.9% 10.2% 10.8% 10.7%

LFL 2.7% 2.7% 3.0% 3.0% Rf + CRP 4.5% 4.8% 4.8% 5.1%

# of stores 2900 2980 3060 3110 Beta Equity 0.90 0.91 1.00 0.93

EUR/PLN 4.26 4.30 4.33 4.36 Mkt Premium 6.0% 6.0% 6.0% 6.0%

EBITDA mg 7.3% 7.3% 7.3% 7.3% Rd 5.5% 5.0% 5.0% 8.1%

Retail - Portugal Tax Rate 19.0% 28.5% 27.5% 33.0%

Sales (€ mn) 3835 3882 3966 4046 D/EV 20.0% 25.0% 20.0% 20.0%

LFL 3.2% 1.4% 1.8% 1.8% WACC 8.8% 8.5% 9.3% 9.6%

# of stores 432 437 440 442 g 2.5% 1.0% 0.0% 2.5%

EBITDA mg 4.9% 5.0% 5.1% 5.2% Perp. EBITDA mg 7.3% 5.4% 5.5% 6.0%

Cash&Carry - Portugal

Sales (€ mn) 980 1020 1028 1036

LFL 3.4% 2.0% 0.8% 0.8%

# of stores 42 42 42 42

EBITDA mg 5.4% 5.5% 5.5% 5.5%

Colombia

Sales (€ mn) 599 784 1046 1396

LFL 16.0% 15.0% 12.0% 10.0%

# of stores 532 712 932 1182

EUR/COP 3489 3632 3686 3649

EBITDA mg -12.0% -6.8% -1.5% 0.0%


Portugal

JERÓNIMO MARTINS

page 44

INVESTMENT REPORT

February 4, 2019

Financials


F2019

F2020

F2021

F17-21

F

Revenues 13728 14622 16276 17337 18135 19093 20119 5%

EBITDA 800 862 922 973 1039 1133 1204 7%

EBITDA adj. 800 862 922 973 1039 1133 1204 7%

EBITDA adj. mg. 5.8% 5.9% 5.7% 5.6% 5.7% 5.9% 6.0%


EBIT 505 568 591 610 654 724 768 7%

EBIT adj. 505 568 591 610 654 724 768 7%


Income tax 117 130 152 151 156 166 168 3%

Others -20 184 -14 -10 0 0 0 n.s.



Net Profit adj. 349 410 396 406 444 500 534 8% Source: JMT.

CAGR Sensitivity Analysis (€/sh) (1)2015 2016 2017 2018

F2019

F2020

F2021

F17-21

F

Net Intangibles 810 787 811 818 824 831 838 1% 5.8%

Net Fix ed Assets 2890 3023 3475 3828 4157 4470 4723 8% 6.8%

Net Financials 99 15 17 17 17 17 17 0% 7.3%

Inv entories 639 719 842 898 938 986 1038 5% 7.8%

ST Receiv ables 160 159 210 210 201 195 190 -2% 8.1%

Other Assets 265 309 376 374 383 393 405 2% (1) EBITDA mg in Poland.

Cash & Equiv alents 471 674 712 100 100 100 100 -39% Average 2018-23.

Total Assets 5333 5686 6442 6244 6620 6992 7311 3% Source: CaixaBank BPI Equity Research.

Equity & Minorities 1593 1991 2013 2024 2070 2127 2163 2%

MLT Liabilities 662 199 334 297 297 297 297 -3%

o.w . Debt 534 115 238 200 200 200 200 -4% Sensitivity Analysis (€/sh) (1)ST Liabilities 3077 3496 4094 3924 4254 4568 4851 4%

o.w . Debt 124 225 304 20 174 281 335 2% -0.5% Δ g +0.5%

o.w . Pay ables 2518 2744 3136 3245 3390 3562 3752 5% -0.5% 16.00 17.14 18.49

Equity+Min. + Liabilities 5333 5686 6442 6244 6620 6992 7311 3% Δ WACC 14.78 15.75 16.88

+0.5% 13.72 14.55 15.51

(1) To Fair Value. Source: CaixaBank BPI ER.

2015 2016 2017 2018F

2019F

2020F

2021F

+ EBITDA 800 862 922 973 1039 1133 1204

- Chg in Net W.C. -220 -177 -282 -65 -126 -145 -157 Change in Estimates- Income Tax es 106 105 121 157 147 155 156

= Operating Cash Flow 914 934 1083 880 1018 1124 1206 2018 2019 2020

- Grow th Capex 211 161 412 344 360 381 329 Sales 0% 0% 0%

- Replacement Capex 204 244 395 378 360 348 367 EBITDA 0% 0% 0%

- Net Fin. Inv . 0 -267 16 10 0 0 0 EPS 0% 0% 0%

= Cash Flow after Inv. 499 796 261 147 298 394 510 Source: CaixaBank BPI Equity Research.

- Net Fin. Ex p. 10 7 12 25 29 32 37

- Div idends Paid 390 167 380 385 399 444 500

+/- Equity 0 0 0 0 0 0 0 Valuation SummaryOther -1 -101 -33 -27 -25 -25 -26

=Change in Net Debt -98 -522 164 290 154 106 54 Business € mn Chg

Net Debt (+)/Net Cash (-) 187 -335 -170 120 274 381 435 Portugal 968 -3%

Retail (DCF) 661 -6%

Cash & Carry (DCF) 306 4%

2015 2016 2017 2018F

2019F

2020F

2021F Poland (DCF) 8953 0%

Sales grow th 8% 7% 11% 7% 5% 5% 5% Hebe 100 15%

EBITDA Adj. grow th 9% 8% 7% 5% 7% 9% 6% Colombia (DCF) (1) 306 -1%

EPS Adj. grow th 13% 17% -3% 3% 9% 13% 7% Non core assets 17 0%

Av g. # sh (mn) 629.3 629.3 629.3 629.3 629.3 629.3 629.3 Total EV 10343 0%

Basic EPS 0.53 0.94 0.61 0.63 0.71 0.79 0.85 Net debt YE19 (2) 459 5%

EPS Adj. Fully diluted 0.55 0.65 0.63 0.65 0.71 0.79 0.85 Total Equity Value 9884 -1%

DPS 0.62 0.26 0.60 0.61 0.63 0.71 0.79 # shares mn (adj) 628 0%

Pay out 50.0% 64.1% 100.0% 100.0% 100.0% 100.0% 100.0% YE19 Price Target (€) 15.75 -1%

ROCE (after tax ) 17.6% 21.2% 19.1% 18.1% 17.9% 18.5% 18.8% (1) 50% execution risk; (2) Adj. by minorities,

ROE 24.4% 38.5% 21.9% 22.2% 24.4% 26.7% 27.8% pension fund, provisions, debt seasonality.

Gearing (ND/EV) 2.1% -3.8% -1.9% 1.3% 3.1% 4.3% 4.9% Source: CaixaBank BPI Equity Research.

Net Debt/EBITDA 0.2x -0.4x -0.2x 0.1x 0.3x 0.3x 0.4x

P&L (€ mn)


Cash flow (€ mn)



11.52

14.34

15.75

17.16

18.00

Fair Value

Soares dos Santos Family , 56%

Heerema, 5%

Other, 39%



an

ali

sis

.ca

ixa

ba

nk

.es

/ b

pie

qu

ity

.bp

i.p

t

Equity

Company Report

LIBERBANK BANKS / Spain

04 Feb. 19 (06:00) (1)


Worth the wait

Delivering on NPA reduction while we wait for merger talks with Unicaja to unfold

Upgrading NPA targets: After beating targets for YE18, Liberbank upgraded

its NPA reduction targets for 2019-20. The bank now expects an NPA ratio below 8% and 5.5% in 2019 and 2020, while the Texas ratio should improve to 55% and 40%, respectively. Meanwhile, the bank is advancing with the mortgage IRB models approval process, which we expect to have a positive impact of c. 110bps in the FL CET1 ratio (which stood at 12.1% at YE18). The wait is over? While we believe that novelties on Unicaja-Liberbank

merger talks are only likely closer to the bank’s AGM (March?), the potential deal is strategically and financially sound: we estimate gross synergies of c. €140mn/year (10% of the combined cost base), with an NPV of €789mn (c. 26% combined mkt cap). Adjusting for a €360mn k increase to raise NPA coverage to 55% as well as address potential litigation risks (interest rates floors and IRPH?) and the M2M of LBK’s bond portfolio while posting a 12% CET1 R, the new co would trade a 0.52x PBV19 and 6.5x PE21 assuming. Excluding these, the new Co trades at 0.45x PTBV19 and 5.8x PE21. Standalone earnings growth: Meanwhile, we expect a 17% EPS CAGR18-

22F, supported by: (1) volumes growth toward a more profitable business mix, (2) eventual increases in interest rates; (3) lower RE impairments and management costs; and (4) efficiency improvements. After incorporating FY18 earnings ,we reach a YE19 Price Target of €0.70 (unchanged from

previous) which includes 50% of the aforementioned synergies NPV. Compelling valuation: A merger with Unicaja stands as an interesting option

to unlock value and the main potential ST trigger. Nonetheless, the recent B/S improvement coupled with earnings growth and attractive valuation makes this also an interesting investment case on a standalone basis. At 0.47x PTBV19, Liberbank trades at a discount to local peers. BUY.

Team leader:

Carlos Peixoto [email protected]

Phone 351 22 607 3141

Assisted by:

Sofía Barallat Bourgeois [email protected]

Phone 34 91 412 11 26

BUYPrev. Buy

High Risk


Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float

Market Multiples 2019F

2020F

2021F

PE n.s. 7.2 6.9

PE Adj. 8.0 7.2 6.9

PCF 4.0 3.6 3.2

Dividend yield 1.7% 5.0% 5.5%

PBV 0.46 0.45 0.43

PTBV 0.49 0.47 0.45


Liberbank vs. IBEX

Source: B loomberg

1 341

€ 0.70€ 0.70

LBK SM / LBK.MC

€ 0.44

€ 0.4 - 0.5

3 066.5

2.7

46%

50

75

100

125

Jan-18 May-18 Sep-18 Jan-19

LBKIBEX

Estimates 2016 2017 2018 2019F

2020F

2021F

2022F

NII (€ mn) 454 406 453 468 479 508 534

NII/ATA 1.13% 1.10% 1.21% 1.20% 1.22% 1.29% 1.34%

PPP (€ mn) 511 223 247 293 334 372 404

NP (€ mn) 129 -259 110 54 184 193 211

adj. EPS (€) 0.08 -0.10 0.04 0.05 0.06 0.06 0.07

DPS (€) 0.00 0.00 0.00 0.01 0.02 0.02 0.03

BVPS (€) 1.47 0.91 0.92 0.94 0.98 1.02 1.06

TBVPS (€) 1.40 0.86 0.88 0.90 0.93 0.97 1.02

ROE 5.7% n.s. 4.2% 6.0% 6.4% 6.5% 6.8%

ROTE 6.0% n.s. 4.4% 6.3% 6.7% 6.8% 7.1%

Source: Company, CaixaBank BPI Equity Research.


LIBERBANK

page 46

INVESTMENT REPORT

February 4, 2019

Liberbank at a Glance

Performing loans breakdown (YE18; €21.6bn) Revenues breakdown

Evolution of capital ratios Medium- term maturities (€ bn)

Regulatory capital, Leverage and NPLs

(Eur mn) 2016 2017 2018 2019F

2020F

2021F

2022F

Asset Quality

NPLs 3 205 1 900 1 142 666 522 383 422

Provision Reserves 1 275 903 605 343 327 354 378

NPL ratio (on Gross loans) 14.6% 8.9% 5.0% 2.9% 2.2% 1.6% 1.7%

NPL ratio (stated) 13.9% 8.6% 4.9% 2.8% 2.2% 1.6% 1.7%

NPL coverage 40% 48% 53% 52% 63% 92% 90%

Capital (BIS3 phased-in)

CET1 capital 2 093 2 134 2 368 2 115 2 241 2 283 2 468

Tier 1 2 253 2 261 2 368 2 115 2 241 2 283 2 468

RWA 18 548 16 812 17 066 15 332 15 110 15 255 15 449

CET1 ratio 11.3% 12.7% 13.9% 13.8% 14.8% 15.0% 16.0%

Tier 1 ratio 12.1% 13.4% 13.9% 13.8% 14.8% 15.0% 16.0%

Leverage

T.Equity/T. Assets 6.0% 7.1% 6.7% 6.8% 7.1% 7.3% 7.6%

Loans/deposits 88% 93% 94% 93% 93% 93% 94%

Source: CaixaBank BPI, company data and Bloomberg.

48%63%

71% 69% 68% 68%

19%

28%29% 27% 28% 27%37%

14%5% 6% 5% 5%

-5% -5% -5% -2% -1%0%

-20%

0%

20%

40%

60%

80%

100%

2017 2018 2019F 2020F 2021F 2022F

other FX&Trading Fees NII

0.2

0.5

0.4

0.3

0.00

0.20

0.40

0.60

2019 2020 2021 2022

Hous. mortgages

62%

Other

companies25%

P. adm. &

other8%

Consumer &

Other4%

RE & constr.

1%

0%

4%

8%

12%

16%

20%

Dec13 Jun16 Dec18

BIS ratio Tier 1 CET1

LIBERBANK

page 47

INVESTMENT REPORT

February 4, 2019


Company: Liberbank Price Perfomance Forward P/E and PBV

Sector: DJ Estoxx Banks €

Valuation monitor

Relative valuation 2019 2020 2021

Adj. P/E

BPI 8.0 7.2 6.9

Consensus 8.7 7.8 7.5

Sector 8.4 7.7 7.3

PBV

BPI 0.46 0.45 0.43

Consensus 0.46 0.44 0.44

Sector 0.68 0.65 0.44

PTBV Market Recommendations

BPI 0.49 0.47 0.45

Consensus 0.47 0.46 0.44

Sector 1.08 1.04 0.76

Dividend yield

BPI 1.7% 5.0% 5.5%

Consensus 2.7% 4.1% 5.3%

Sector 6.4% 7.1% 7.2%

P&L and B\S monitor

BPI estimates/Consensus 2019 2020 2021

NII -2% -4% -2%

Total revenues 0% 0% 2% Fair Value Comparison(1)

CAGR 2018-21

Total costs -1% -5% -11%

Provisions -9% 8% 14%

Profit before taxes -62% 7% 6%


Loans -3% -4% -3%

Deposits 0% 0% 2%

Profitability monitor

NII/ATA

BPI 1.20% 1.22% 1.29%

Consensus 1.21% 1.22% 1.33%

Cost-to Income (inc. D&A)

BPI 56.9% 52.7% 50.3%

Consensus 57.5% 55.3% 57.2% Net Profit Consensus (€ mn) EPS Consensus (€)

LLProvisions/Loans

BPI 0.2% 0.3% 0.4%

Consensus 0.3% 0.3% 0.4%

ROE

BPI 6% 6.4% 6.5%

Consensus 4.9% 5.7% 6.1%

ROA

BPI 0.14% 0.47% 0.49%

Consensus 0.35% 0.44% 0.46%

RoRWA

BPI 0.33% 1.21% 1.27%

Consensus 0.79% 1.03% 1.07%

(1) Product of the sector multiple and consensus estimate for the company.


-30% -20% -10% 0% 10%

YTD

3 M

1 Y

DJ Estoxx Banks €

Liberbank

0.42

0.640.53

0.70

0.00

1.00

P/E PBV Consens. BPI


Positive

67%Negative

0%

Neutral

33%

FY19

FY20

FY21

0.02

0.05

0.08

0.11

Sep-17 Mar-18 Aug-18 Jan-19

-10% 0% 10% 20% 30%

Adj. EPS

NII

Revenues

PBT

Net Profit

Consensus BPI

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0

5

10

15

20

25

30

Mar-17 Oct-17 Jun-18 Jan-19

Forward P/E

(rhs)

Forward PBV (lhs)

FY19

FY20

100

150

200

250

Sep-17 Mar-18 Aug-18 Jan-19

0.20

0.50

0.80

Jan-17 Jan-18 Jan-19

Price

Consensus

Price Target

LIBERBANK

page 48

INVESTMENT REPORT

February 4, 2019

Financials

CAGR Valuation Summary2016 2017 2018 2019

F2020

F2021

F2022

F18-22

F € mn €/sh. Chg

NII 454 406 453 468 479 508 534 4% PV explicit period 237 0.08 1%

Div idends 3 2 6 6 6 6 6 3% NPV excess CET1 732 0.24 5%

Commissions 182 182 183 186 196 203 211 4% PV terminal value 958 0.32 0%

FX & trading 346 89 33 38 38 38 39 4% Unr. capital gains 0 0.00 -107%

Equity income 23 44 30 31 31 32 32 2% YE19 Equity Value 1 927 0.63 2%

Other income (net) -69 -78 -64 -49 -44 -40 -39 -12% 10% DTCs haircut -119 -0.04 1%

Net Op. Revenue 939 646 640 679 707 748 784 5% Net synergies NPV(1) 395 0.13 1%

Personnel Expenses 248 250 236 233 218 220 222 -1% YE19 Price Target (€) n.s. 0.70 0%

Other admin. exp. 144 138 121 115 116 117 118 0% (1) 50% of net synergies from potential merger with UNI.

Operating cash-flow 548 258 283 331 373 411 443 12% Source: CaixaBank BPI Equity Research.

Depreciation 37 36 37 38 39 39 39 1%

Pre-provision profit 511 223 247 293 334 372 404 13% DCF assumptionsLoan loss impairments 143 269 58 55 81 107 116 19%

Other prov isions 155 7 35 162 5 5 5 -38% Re 10.0%

Other gains or losses -62 -402 -14 -5 -3 -3 -3 -34% Rf 3.25%

Profit before taxes 151 -454 140 72 245 257 281 19% Country Risk Premium 0.75%

Taxes 48 -152 30 18 61 64 70 24% Beta 1.0

Minorities -26 -44 0 0 0 0 0 n.s. Market premium 6.0%

Net Profit 129 -259 110 54 184 193 211 18% Tax rate 30%

Adjustments (1) 6 5 2 113 0 0 0 n.s. G (real) 0.0%

Adjusted Net Profit 135 -253 112 166 184 193 211 17% RONE 10%

(1) Non-recurrent items and off P&L costs. CET1 requirement 10%

Balance Sheet (€ bn) CAGR Source: CaixaBank BPI Equity Research.

2016 2017 2018F

2019F

2020F

2021F

2022F

18-22F

Cash&Dep. with C.Banks 1.0 1.8 0.9 0.9 1.0 1.0 1.0 2% Sensitivity Analysis (€ share)Trading, AFS&HTM port. 10.3 7.4 10.8 10.7 10.6 10.5 10.4 -1%

Loans to credit inst. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.s. -1% Δ RF +1%

Loans to customers 21.9 21.4 22.7 22.9 23.5 24.0 24.7 2% -1% 0.85 0.75 0.70

Participations 0.3 0.3 0.5 0.5 0.5 0.5 0.5 0% CET1 R requir. 0.80 0.70 0.65

Tangible&intang. assets 1.0 1.2 1.3 1.3 1.3 1.3 1.4 2% +1% 0.75 0.70 0.65

Other assets 3.7 3.3 3.1 2.7 2.5 2.4 2.3 -7% Source: CaixaBank BPI Equity Research.

Total assets 38.3 35.5 39.2 39.1 39.3 39.7 40.2 1%

Deposits 24.8 23.0 24.1 24.7 25.3 25.8 26.3 2%

Trading portfolio 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0% Shareholder structure (%)Debt to Fin. Ins. 4.4 3.8 8.4 7.8 7.4 7.2 7.2 -4%

Debt securities 5.5 5.2 3.1 3.0 2.9 2.7 2.6 -4%

Subordinated debt 0.1 0.1 0.0 0.0 0.0 0.0 0.0 n.s.

Other liabilities 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0%

Provisions 0.4 0.2 0.1 0.1 0.1 0.2 0.2 2%

Minorities (B/S) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0%

Preferred stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.s.

Shareholders' equity 2.5 2.7 2.8 2.9 3.0 3.1 3.2 3%

Total liab. & sh. Equity 38.3 35.5 39.2 39.1 39.3 39.7 40.2 1%

Growth, per share data and ratios2016 2017 2018

F2019

F2020

F2021

F2022

F

NII growth -8% -11% 11% 3% 2% 6% 5%

Net profit growth 0% n.s. n.s. -51% n.s. 5% 9%

Adj. Net Profit growth 0% n.s. n.s. 48% 11% 5% 9%

Adj. EPS growth -1% -248% -134% -51% n.s. 5% 9%

Avg. # sh (f.diluted,mn) 1787 2426 3067 3053 3040 3040 3040

Basic EPS 0.07 -0.11 0.04 0.02 0.06 0.06 0.07

Adj.EPS 0.08 -0.10 0.04 0.05 0.06 0.06 0.07 Source: Company disclosures.

BVPS 1.5 0.9 0.9 0.9 1.0 1.0 1.1

TBVPS 1.4 0.9 0.9 0.9 0.9 1.0 1.0

DPS 0.00 0.00 0.00 0.01 0.02 0.02 0.03 Adj. EPS revision NII/ATA 1.13% 1.10% 1.21% 1.20% 1.22% 1.29% 1.34%

C/I (excl. D&A) 42% 60% 56% 51% 47% 45% 43% €/sh. 2019F

2020F

2021F

2022F

C/I (inc. D&A) 46% 65% 61% 57% 53% 50% 48% Current 0.05 0.06 0.06 0.07

CoR 0.60% 1.19% 0.26% 0.24% 0.35% 0.45% 0.48% Previous 0.05 0.06 0.06 0.07

ROE 5.7% n.s. 4.2% 6.0% 6.4% 6.5% 6.8% Chg 0% 2% 1% 1%

ROTE 6.0% n.s. 4.4% 6.3% 6.7% 6.8% 7.1% Source: CaixaBank BPI Equity Research.

ROA 0.32% n.s. 0.29% 0.14% 0.47% 0.49% 0.53%

RoRWA 0.73% n.s. 0.65% 0.33% 1.21% 1.27% 1.37%

Source: Company data and CaixaBank BPI Equity Research (F).

P&L (€ mn)

Others44.4

C.Asturias15.4

C.Extremadura4.6

C.Cantabria3.2

T. Flores7.1

Masaveu5.5

Oceanwood16.7

Norges B. 3.1



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Company Report

Repsol OIL&GAS / Spain

04 Feb. 19 (06:00) (1)

(1) Time of the conclusion of the analysis, issue of recommendation and publication. Note: On the 20th September 2018, CaixaBank S.A. (“CABK”) announced that its Board of Directors, agreed to sell down the existing shareholding in Repsol S.A. (“REP”) through a disposal programme. The sell-down is expected to proceed as follows: (i) Two existing equity swaps for 30,547,921 shares (1.91%) and 43,074,196 shares (2.70%) at 15.39€ and 15.55€, respectively, are to be early settled with a value date no later than the end of September 2018. (ii) The disposal programme for 75,789,715 shares of REP will commence immediately and terminate no later than the end of the first quarter of 2019. Disposals are to be limited on daily basis to a maximum of 15% of the daily trading volume. The end of the disposal programme will

be disclosed by a significant event filing. (CNMV). According to the CaixaBank FY18 results release, the stake in Repsol reached 3.59% in January 2019.

Solid Dividend Play

First-class DY, discount multiples, lower oil breakeven prices and a good vehicle to play the IMO.

Sustainable dividend play: DPS is targeted at €1/sh by 2020, fully funded

under a low oil price scenario of $50/bbl. The scrip option is maintained, with dilution offset by a share buyback. Repsol (REP) trades at a DY19F of 6.3% and a DY20F of 6.6%, ahead of integrated peers (5.0% and 5.1%, respectively).

Well equipped for the IMO 2020, with Middle Distillates accounting for >50%

of total yield (fuel oil yield 3-6%). REP’s refining margin target of $8.4/bbl by 2020 (our estimates are aligned), +$1.6/bbl vs. YE17 may offer upside risk. €18.90/sh YE19 Price Target: We have fine-tuned our estimates and

valuation to reflect the last trading update, FX and the new O&G prices scenario (CaixaBank Research: $68/bbl in 2019; $66/bbl in 2020). Our YE19 Price Target stands at €18.90/sh (-3%, mostly due to upstream, on lower

production and slightly lower brent prices). 2020 EBITDA is targeted at €8.5bn (@$50/bbl) vs. € 9bnF (@$66/bbl) or €7.9bn @ $50/bbl on more conservative downstream forecasts and no additional acquisitions in low carbon.

Upgrading to BUY: We see REP as a quality option to hold. CaixaBank

Research sets a $68/bbl brent price scenario for 2019, backed by a positive 1H of the year on OPEC+ cuts, the end of exemptions for Iran oil sanctions, Libya unrest as well as instability in Venezuela and recent sanctions. Venezuela remains a caveat but the risk is contained and known to the market ($0.9bn exposure as of Q3). B/S issues are well gone and Repsol is now a more balanced play both in terms of inputs (oil/gas) as well as geographies, with interesting savings from efficiency/digitalization (upstream target $1bn/year FCF by 2020) and a competitive refining system making it one of the best prepared players to face the IMO kick-off in 2019. A 6.3% DY19F is a perk, set in stone under a $50/bbl scenario. BUY.

Team leader:

Flora Trindade, CFA [email protected]

Phone 351 22 607 4377

Bruno Silva, CFA [email protected] Phone 351 22 607 4375

BUYPrev. Neutral

Medium Risk


Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float


PE 9.9 8.8 7.5

EV/Sales 0.7 0.6 0.6

EV/EBITDA 4.1 3.7 3.3

EV/EBIT 7.1 6.4 5.5

DY 6.0% 6.3% 6.6%

FCFE Yield (%) 17.1% 5.9% 9.1%

FCFF Yield (%) 15.3% 6.0% 8.6%

PBV 0.7 0.7 0.7


REPSOL vs. IBEX

Source: Bloomberg

1558.9

207.1

83%

€ 18.90€ 19.40

REP SM / REP.MC

€ 15.125

€ 13 - 16.8

23,578

60

70

80

90

100

110

120

130

140

Feb/18 May/18 Jul/18 Oct/18 Jan/19

REP S

IbexEstimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 41,741 36,387 43,938 45,371 47,738 50,327 50,148

EBITDA (€ mn) 4,960 5,032 6,580 7,349 8,034 9,030 8,860

Margin (%) 12% 14% 15% 16% 17% 18% 18%

NP (€ mn) 1,860 1,922 2,405 2,330 2,632 3,098 2,994

EPS (€) 1.34 1.32 1.59 1.53 1.72 2.03 1.96

DPS (€) 0.96 0.76 0.76 0.90 0.95 1.00 1.00

Capex (€ mn) 12,562 3,157 2,856 3,960 4,468 4,637 3,638

Adj. FCF (€ mn) -7,849 1,289 4,509 4,554 1,791 2,562 3,256

Net debt (€ mn) 11,934 8,144 6,267 3,620 3,678 3,059 1,753

Net Debt/EBITDA 2.4 1.6 1.0 0.5 0.5 0.3 0.2

Source: Company, CaixaBank BPI Equity Research (F). Note: CCS EBITDA and NP.


https://www.cnmv.es/Portal/hr/verDoc.axd?t=%7bddb0626f-15f5-414b-9dfa-0c9fb01cc36f%7d

REPSOL

page 50

INVESTMENT REPORT

February 4, 2019

Repsol at a Glance

EBITDA breakdown by business EBITDA Evolution (€ bn)

Capex vs. EBITDA (Eur mn) Capex per area (€ mn)

R&M EBITDA vs. Refining mg


Production evolution (kboepd)

57%

45%

1%

-3%

53%

49%

0%

-3%

-20% 0% 20% 40% 60% 80%

Upstream

Downstream

Low carbon

Corporate and others

2017 2021F

-1.0

1.0

3.0

5.0

7.0

9.0

11.0

2015 2016 2017 2018F 2019F 2020F 2021F

Upstream DownstreamLow carbon Corporate and others

0

2000

4000

6000

8000

10000

2015 2016 2017 2018F 2019F 2020F 2021F

EBITDA Capex

0

2000

4000

6000

2015 2016 2017 2018F 2019F 2020F 2021F

Upstream Downstream

Corporate and others Low carbon

0

300

600

900

20

15

20

16

20

17

20

18

F

20

19

F

20

20

F

20

21

F

Africa Europe LatAm

North America Asia and Oceania

0

1000

2000

3000

4000

5000

0.0

2.0

4.0

6.0

8.0

10.0

20

15

20

16

20

17

20

18

F

20

19

F

20

20

F

20

21

F

Refining mg EBITDA Downstream (RCA)

(USD/bbl) (€ mn)

REPSOL

page 51

INVESTMENT REPORT

February 4, 2019




2018 2019 2020

EBITDA 4% 9% 13%

EBIT 7% 6% 8%


Net Debt -29% -32% -42%



19Y

20Y

5000

5500

6000

6500

7000

7500

8000

8500

9000

Jun-17 Jan-18 Jul-18 Jan-19

21Y

19Y

1.20

1.40

1.60

1.80

2.00

2.20

2.40

Jun-17 Jan-18 Jul-18 Jan-19

21Y

20Y

17.92

24.53

18.26 18.90

0

5

10

15

20

25

30

P/E P/BV Consensus BPI


Positive56%

Negative13%

Neutral31%

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Feb-17 Feb-18 Jan-19

Price


Modelling assumptions 2014 2015 2016 2017 2018F 2019F 2020F 2021F DCF Assumptions

EUR/USD 1.33 1.11 1.11 1.13 1.18 1.14 1.15 1.15

Downstream

Upstream WACC 8.0%

Brent prices ($/bbl) 92.4 52.4 43.7 54.2 71.3 68.3 66.0 65.8 Re 8.6%

HH $/Mbtu 4.4 2.7 2.5 3.1 3.2 2.9 2.7 2.6 Rf 3.25%

Production (kboe/d) 354 558 690 695 715 717 735 736 CRP 0.75%

EBITDA 2,667 1,512 2,072 3,507 4,800 4,876 5,205 5,022 Be 0.77

EBIT 1,149 -1,107 -87 1,009 2,507 2,464 2,628 2,451 Mkt premium 6.0%

Tax rate 25.0%

Downstream D/EV 10.8%

Refining mg ($/bbl) 4.1 8.5 6.3 6.8 6.7 7.2 8.4 8.4 Rd 4.2%

EBITDA CCS 2,231 3,759 3,367 3,243 2,704 3,308 3,983 3,999

EBIT CCS 1,488 3,041 2,467 2,467 1,928 2,475 3,093 3,109

Capex 3,632 4,557 3,157 2,856 3,960 4,468 4,637 3,638

Upstream 2,843 3,518 2,364 2,072 2,227 2,878 2,777 2,638

Downstream 702 942 743 757 900 1,490 1,760 900

Low Carbon 0 0 0 0 753 0 0 0

Others 87 97 50 27 80 100 100 100


REPSOL

page 52

INVESTMENT REPORT

February 4, 2019

Financials


Revenues 41741 36387 43938 45371 47738 50327 50148 3%

EBITDA 4317 5226 6723 7673 8019 8982 8852 7%

EBITDA adj. 4960 5032 6580 7349 8034 9030 8860 8%

EBITDA adj. mg. 11.9% 13.8% 15.0% 16.2% 16.8% 17.9% 17.7% 4%


EBIT -2874 1813 3399 4506 4671 5406 5275 12%

EBIT adj. 1764 2067 3214 4182 4686 5455 5283 13%

Net financial results 875 205 -114 -348 -353 -357 -356 33%

Income tax -814 538 1124 1478 1673 1973 1907 14%

Others 0 0 0 0 0 0 0 n.s.

Minority Interests 42 -256 40 27 27 27 27 -10%

Net Profit reported -1227 1736 2121 2527 2624 3068 2989 9%

Net Profit adj. 1860 1922 2405 2330 2632 3098 2994 6% Source: Repsol.

CAGR

2015 2016 2017 2018F 2019F 2020F 2021F 17-21F SoP ValuationNet Intangibles 4522 5109 4584 4584 4584 4584 4584 0%

Net Fixed Assets 28463 27363 24667 25684 26789 27853 27916 3% € mn %

Net Financials 11758 10176 9268 5532 5596 5660 5724 -11% Upstream (1) 17,552 47%

Inventories 2853 3605 3797 4923 5086 5377 5423 9% Downstream (2) 20,214 54%

ST Receivables 5680 5885 5912 6105 6423 6772 6748 3% Low Carbon 753 2%

Other Assets 7353 8024 7028 7428 7428 7028 7028 0% Others (inc. holding) -1,265 -3%

Cash & Equivalents 2448 4687 4601 7601 7601 7601 7601 13% EV 37,254

Total Assets 63077 64849 59857 61857 63507 64875 65023 2% Net debt adj. (3) 8,225

Equity & Minorities 28689 31111 30063 31345 32551 34137 35626 4% Minorities 198

MLT Liabilities 21296 20019 18278 15758 15808 15159 13848 -7% Equity 28,831

o.w. Debt 10581 9482 10080 7560 7610 6961 5650 -13% # shares (mn) 1,527

ST Liabilities 13092 13719 11516 14754 15148 15579 15549 8% YE19 Price Target (€)/sh 18.90

o.w. Debt 7073 6909 4206 7206 7206 7206 7206 14% Source: CaixaBank BPI Equity Research

o.w. Payables 0 0 0 0 0 0 0 n.s. (1) DCF (wacc=10%)

Equity+Min. + Liabilities 63077 64849 59857 61857 63507 64875 65023 2%

2015 2016 2017 2018F 2019F 2020F 2021F

+ EBITDA 4317 5226 6723 7349 8034 9030 8860

- Chg in Net W.C. -1090 517 110 756 102 258 59

- Income Taxes 246 283 357 1878 1673 1573 1907 Sensitivity to key inputs= Operating Cash Flow 5161 4426 6256 4714 6259 7199 6894 (€ bn) FCF Adj. NP

- Growth Capex 8255 567 477 1303 1158 1425 563 Brent +/- $5/bbl 0.3 0.3

- Replacement Capex 4307 2590 2379 2657 3310 3212 3075 -0.3 -0.3

- Net Fin. Inv. 448 -1901 -254 -3800 0 0 0 HH +/- $0.5/MBtu 0.2 0.1

= Cash Flow after Inv. -7849 3170 3654 4554 1791 2562 3256 -0.2 -0.1

- Net Fin. Exp. -501 392 438 412 417 421 420 Ref mg +/- $1/bbl 0.2 0.2

- Dividends Paid 488 420 332 1375 1451 1527 1527 -0.2 0.2

+/- Equity 67 54 31 0 0 0 0 Note: per year

Other -2230 1378 -1038 -120 19 6 -4 Source: Repsol

=Change in Net Debt 9999 -3790 -1877 -2647 59 -619 -1306

Net Debt (+)/Net Cash (-) 11934 8144 6267 3620 3678 3059 1753 Sensitivity to oil price

2015 2016 2017 2018F 2019F 2020F 2021F

Sales growth 13% 15% -17% -3% -5% -5% 0%

EBITDA Adj. growth -14% -1% -24% -10% -9% -11% 2%

EPS Adj. growth 5% -1% 20% -4% 13% 18% -3%

Avg. # sh (mn) 1387.5 1453.7 1511.9 1527.4 1527.4 1527.4 1527.4

Basic EPS -0.88 1.19 1.40 1.53 1.72 2.03 1.96

EPS Adj. Fully diluted 1.34 1.32 1.59 1.53 1.72 2.03 1.96

DPS 0.96 0.76 0.76 0.90 0.95 1.00 1.00

Payout -108% 63% 54% 59% 55% 49% 51%

ROCE (after tax) -7.2% 3.7% 7.4% 9.0% 9.6% 10.8% 10.3%

ROE -4.4% 5.9% 7.0% 7.7% 8.3% 9.4% 8.7%

Gearing (ND/EV) 43.6% 28.7% 21.4% 12.4% 12.6% 10.4% 6.0%

Net Debt/EBITDA 2.4x 1.6x 1.0x 0.5x 0.5x 0.3x 0.2x


(2) DCF (wacc=8%)

P&L (€ mn)


Cash flow (€ mn)



(3) ND adjusted for financial leasings, hybrid bonds,

treasury shares and provisions.

Note: # shares at YE post share buyback.

Caixabank4%

Sacyr8%

BlackRock5%

Others84%

-

5

10

15

20

25

30

35 45 55 65 75 85 95

BP

I's F

air V

alu

e/s

h (

€)

LT Oil price in real terms ($/bbl)



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Company Report

VIDRALA CONTAINER GLASS / Spain

04 Feb. 19 (06:00) (1)


Bullet proof glass

Solid earnings evolution with prices and margins under an upwards trend; Brexit carries FX risk, but VID offers an attractive valuation, solid B/S and best-in-class CF

Solid earnings ahead: we expect Vidrala’s (VID) volumes to evolve positively

in 2019 (+1.5% yoy) and prices to increase by 3.0% (+2.5% in 2018) driven by a disciplined supply, a solid demand and rising cost inflation in the industry (3%-4% due to higher electricity and natural gas costs). Margins should grow by 100bps (+110bps in 2018), reflecting a 3.0% price increase vs. a 2.0% cost inflation (VID has a hedging policy covering 60% of its 2019 energy needs). This should allow 2019 EPS to post a 15% yoy growth (+12% CAGR18-21). Earnings could expand even further: with the largest players focused on

profitability, we do not rule out the expected industry cost inflation to trigger a price increase above our 3.0% forecast in 2019. VID should also continue to crystalize synergies from Santos Barosa (SB), particularly at the sales level (SB used to be more aggressive on prices), while working on the improvement of its operations. Altogether, this could lead to an even stronger earnings momentum for VID in 2019 (we stand 1% above EBITDA consensus). Brexit is the main risk: the UK accounts for 28% of VID’s EBITDA but the

resilient container glass industry should allow sales to be more protected under a potential cycle downturn (VID’s volumes expanded by 2-3% in the last cycle downturn – 2012 – vs. a 2% underlying weighted average GDP contraction of the portfolio). In our view, the risk comes from FX (translation effect), with a 5% GBP swing impacting EPS and CF by 2%. YE19 Price Target of €114.00 (unchanged): VID trades at 15.9x PE19, 4%

above its European peers (10Y historical premium of 5%) and at an average 7% FCFE19-21 yield, which we see as attractive. Brexit is the main risk due to FX swings but VID’s underlying earnings momentum should be strong and CF should accelerate in 2019. VID offers a solid B/S and a best-in-class CF generation profile while potential new M&A could spice the stock. BUY.

Team leader:

Bruno Bessa [email protected]

Phone 351 22 607 3183

BUY Prev. Buy

Medium Risk


Company Profile

Bloomberg/Reuters


52-Week range

Market Cap (€ mn)

Shares Out (mn)

ADV (€ mn)

Free Float


PE 18.2 15.9 14.3

EV/Sales 2.5 2.4 2.3

EV/EBITDA 10.1 9.3 8.8

EV/EBIT 16.4 14.5 13.2

DY 1.2% 1.3% 1.5%

FCFE Yield (%) 4.8% 6.6% 7.5%

FCFF Yield (%) 4.0% 5.6% 6.3%

PBV 3.2 2.8 2.4


VID vs. IBEX Index

Source: Bloomberg

24.8

€ 114.00€ 114.00

VID SM / VID.MC

€ 79.40

€ 68.1 - 90.2

1 969

1.8

44%

70

80

90

100

110

120

Jan-18 Jul-18 Jan-19

VID

IBEX Index

Estimates 2015 2016 2017 2018F 2019F 2020F 2021F

Sales (€ mn) 803 774 823 947 989 1 031 1 072

EBITDA (€ mn) 161 171 195 235 255 270 284

Margin (%) 20.1% 22.1% 23.7% 24.8% 25.8% 26.2% 26.5%

NP (€ mn) 61 68 89 108 124 138 151

EPS (€) 2.45 2.73 3.60 4.37 5.01 5.56 6.09

DPS (€) 0.68 0.72 0.80 0.96 1.06 1.16 1.28

Capex (€ mn) 469 64 329 98 80 73 86

Adj. FCF (€ mn) 92 120 114 96 133 150 147

Net debt (€ mn) 404 322 487 416 312 193 78

Net Debt/EBITDA 2.5 1.9 2.5 1.8 1.2 0.7 0.3




VIDRALA

page 54

INVESTMENT REPORT

February 4, 2019

Vidrala at a Glance

FY17 Sales Breakdown by Segment (€825mn) FY17 Sales Breakdown by Geography (€825mn)

Western Europe Industry Market Share VID's Market Share per Geography

VID's Installed Capacity (2.2mn tonnes) VID’s CF Generation (€ mn)

(1) ex-Encirc. (2) ex-Santos Barosa. Source: VID, CaixaBank BPI Equity Research.

Vidrala is one of the largest container glass players in Europe. The company, based in the Basque country (Northern Spain), has

plants in Spain, Portugal, Italy, Belgium, UK and Ireland. Vidrala manufactures glass containers mainly for beverages, particularly

for w ine, beer, spirits and olive oil. Spain, UK, France, Italy and Portugal are its main markets.

Wine35%

Beer26%

Spirits9%

Food11%

Soft Drinks

11%

Others8%

Iberia42%

UK & Ireland

35%

Italy6%

Others17%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

20

40

60

80

100

120

140

160

2009

2010

2011

2012

2013

2014

2015 (1)

2016

2017 (2)

2018F

2019F

2020F

2021F

FCFE (LHS) ND/EBITDA (RHS)

O-I29%

Verallia29%

Ardagh Glass

13%

Vidrala15%

Others14%

35% 35%

6%4%

15%

Iberia UK France Italy W. Europe

Spain32%

Portugal25%

Italy6%

Belgium8%

UK + Ireland

29%

VIDRALA

page 55

INVESTMENT REPORT

February 4, 2019




2018 2019 2020

Revenues 0% 1% 4%

EBITDA 0% 1% 5%

EBIT -1% 1% 8%

Net Profit -3% -1% 6%

Net Debt 1% -2% -11%



180

200

220

240

260

280

300

Jun-17 Apr-18 Jan-19

FY20

FY21

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

Jun-17 Apr-18 Jan-19

FY19

FY20

FY21

84.40

114.00

0

20

40

60

80

100

120

Consensus BPI


Positive17%

Negative41%

Neutral42%

34.0

44.0

54.0

64.0

74.0

84.0

94.0

Feb-17 Feb-18 Jan-19

Price


FY19

2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

VID ex-Encirc and SB

Sales (€ mn) 480 460 483 485 506 527 548 571 594 615 637

Volumes (th Ton) 1174 1141 1186 1162 1179 1203 1227 1252 1277 1297 1317

Selling price (€/Ton) 409 403 407 417 430 438 447 456 465 474 484

EBITDA mg 21.1% 23.3% 25.5% 26.2% 27.0% 27.2% 27.5% 27.6% 27.7% 27.7% 27.5%

Encirc

Sales (€ mn) 324 314 310 324 339 354 368 383 398 412 426

EUR/GBP 0.73 0.82 0.88 0.87 0.87 0.87 0.87 0.88 0.88 0.88 0.88

EBITDA mg 18.5% 20.2% 20.2% 19.9% 20.9% 21.6% 22.0% 22.2% 22.4% 22.2% 22.0%

Santos Barosa

Sales (€ mn) n.a. n.a. 131 138 144 150 156 162 169 175 181

EBITDA mg n.a. n.a. 27.7% 31.6% 33.1% 33.6% 34.0% 34.0% 34.0% 34.0% 34.0%

Source: Bloomberg and CaixaBank BPI Equity Research.

VIDRALA

page 56

INVESTMENT REPORT

February 4, 2019

Financials


F2019

F2020

F2021

F17-21

F

Revenues 803 774 823 947 989 1031 1072 7%

EBITDA 161 171 195 235 255 270 284 10%

EBITDA adj. 161 171 195 235 255 270 284 10%

EBITDA adj. mg. 20.1% 22.1% 23.7% 24.8% 25.8% 26.2% 26.5%


EBIT 86 93 117 145 164 180 195 14%

EBIT adj. 86 93 117 145 164 180 195 14%

Net financial results -11 -9 -7 -8 -7 -6 -4 -17%

Income tax 15 17 21 29 33 37 40 18%

Others 0 0 0 0 0 0 0 n.s.

Minority Interests 0 0 0 0 0 0 0 n.s.


Net Profit adj. 61 68 89 108 124 138 151 14% Source: VID.

CAGR

2015 2016 2017 2018F

2019F

2020F

2021F

17-21F Valuation Summary (€ mn)

Net Intangibles 66 71 233 231 229 227 224 -1%

Net Fix ed Assets 657 593 683 695 687 674 674 0% New Chg.

Net Financials 2 5 2 2 2 2 2 0% EV 3190 0%

Inv entories 201 181 190 199 202 210 217 3% - Adj. Net Debt YE19 (1) 366 1%

ST Receiv ables 217 206 219 250 261 271 282 6% + Fin. Inv estments 2 0%

Other Assets 42 40 35 41 42 44 46 7% Equity Value 2 826 0%

Cash & Equiv alents 16 0 42 14 13 17 32 -7% # shares (mn) 24.8 0%

Total Assets 1200 1096 1405 1432 1437 1444 1477 1% YE19 Price Target (€) 114.00 0%

Equity & Minorities 477 475 528 613 711 820 939 15% (1) Adj. for Other MLT Creditors.

MLT Liabilities 462 360 542 464 359 244 144 -28% Source: CaixaBank BPI Equity Research.

o.w . Debt 416 310 488 410 305 190 90 -34%

ST Liabilities 262 261 335 355 368 381 395 4%

o.w . Debt 4 12 42 20 20 20 20 -17%

o.w . Pay ables 175 173 199 227 234 243 252 6% DCF AssumptionsEquity+Min.+Liabilities 1200 1096 1405 1432 1437 1444 1477 1%

Re

Rf

2015 2016 2017 2018F

2019F

2020F

2021F CRP

+ EBITDA 161 171 195 235 255 270 284 Beta Equity

- Chg in Net W.C. -8 -27 -9 10 7 9 9 Mkt Premium

- Income Tax es 10 22 15 24 31 35 39 Rd

= Operating Cash Flow 159 176 189 201 217 226 237 D/EV

- Grow th Capex 409 0 253 0 0 0 0 Tax rate

- Replacement Capex 60 64 77 98 80 73 86 WACC

- Net Fin. Inv . 0 3 -3 0 0 0 0 g

= Cash Flow after Inv. -309 108 -138 103 138 153 150 Source: CaixaBank BPI Equity Research.

- Net Fin. Ex p. 11 9 7 8 7 6 4

- Div idends Paid 17 18 20 24 26 29 32

+/- Equity 0 0 0 0 0 0 0

Other 0 0 0 0 0 0 0 Sensitivity Analysis (€/sh)=Change in Net Debt 336 -82 165 -71 -104 -119 -115

Net Debt(+)/Net Cash(-) 404 322 487 416 312 193 78 -0.5% Δ g +0.5%

-0.5% 131.00 105.00 86.80

Δ WACC 145.00 114.00 92.90

2015 2016 2017 2018F

2019F

2020F

2021F +0.5% 162.70 124.80 100.10

Sales grow th 71% -4% 6% 15% 4% 4% 4% Source: CaixaBank BPI Equity Research.

EBITDA Adj. grow th 49% 6% 14% 20% 9% 6% 5%

EPS Adj. grow th 18% 11% 32% 22% 15% 11% 9%

Av g. # sh (mn) 24.8 24.8 24.8 24.8 24.8 24.8 24.8

Basic EPS 2.45 2.73 3.60 4.37 5.01 5.56 6.09 Change in EstimatesEPS Adj. Fully diluted 2.45 2.73 3.60 4.37 5.01 5.56 6.09

DPS 0.68 0.72 0.80 0.96 1.06 1.16 1.28 2018 2019 2020 2021

Pay out 29.3% 29.4% 26.8% 24.2% 23.2% 23.0% 23.1% Revenues 0% 0% 0% 0%

ROCE (after tax ) 10.1% 8.7% 10.3% 11.1% 12.5% 13.7% 14.8% EBITDA 0% 0% 0% 0%

ROE 13.8% 14.2% 17.8% 19.0% 18.8% 18.0% 17.2% EBIT 0% 0% 0% 0%

Gearing (ND/EV) 17.0% 13.5% 20.5% 17.5% 13.1% 8.1% 3.3% Net Profit 0% 0% 0% 1%

Net Debt/EBITDA 2.5x 1.9x 2.5x 1.8x 1.2x 0.7x 0.3x Net debt -1% 1% -3% -11%


0.7


P&L (€ mn)

8.5%

3.25%

0.84%

Cash flow (€ mn)

6.0%

4.6%

25.0%

21.0%

7.3%

2.0%



Delclaux Family & historical shareholders,

47.0%

Addv alia Capital, 5.5%

Gallo Family , 3.6%

Allianz, 3.0%

Other, 40.9%

This research report is only for private circulation and only partial reproduction is allowed, subject to mentioning the source. This research report is based on information obtained from sources which we believe to be credible and reliable, but is not guaranteed as to accuracy or completeness. This research report does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive it. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this research report and should understand that the statements regarding future prospects may not be realized. Unless otherwise stated, all views (including estimates, forecasts, assumptions or perspectives) herein contained are solely expression of CaixaBank’s Equity Research department and are subject to change without notice. Recommendations and opinions expressed are our current opinions as of the date referred on this research report. Current recommendations or opinions are subject to change as they depend on the evolution of the company and subsequent alterations to our estimates, forecasts, assumptions, perspectives or valuation method used. The valuation models are systematically reviewed and validated, particularly with regard to the method of valuation and assumptions used. Investors should also note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than initially invested. There are no pre-established policies regarding frequency, update or change in recommendations issued by CaixaBank’s Equity Research. The same applies to our coverage policy. Past performance is not a guarantee for future performance. CaixaBank Group accepts no liability of any type for any indirect or direct loss arising from the use of this research report. For further information concerning CaixaBank Research recommendations and valuations, please visit www.bpiequity.bpi.pt.

For the ease of reference and comprehension, references to CaixaBank shall be interpreted as jointly made to CaixaBank, S.A.. and CaixaBank Sucursal en Portugal (the CaixaBank Portuguese Branch) as the Research Team of CaixaBank is composed by employees employed in CaixaBank or in CaixaBank Portuguese Branch.

This research report did not have any specific recipient. The company subject of the recommendation was unaware of the recommendation or did not validate the assumptions used, before its public disclosure. Each Research Analyst responsible for the content of this research report certifies that, with respect to each security or issuer covered in this report: (1) all of the views expressed accurately reflect his/her personal views about those securities/issuers; and (2) no part of his/her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. There are no conflicts of interests between CaixaBank or its respective Analysts and the issuer covered, except when mentioned in the Report. The relevant Research Analysts do not hold any shares representing the capital of the companies of which they are responsible for compiling the Research Report, except when mentioned in the Report. CaixaBank Analysts may participate in meetings to prepare BPI's involvement in placing or assisting in public offers of securities issued by the company that is the subject of the recommendation, which will be disclosed in the research report.

CaixaBank has compiled policies and procedures applicable to the investment recommendations activity. Such document is available for consultation on request.

Banco BPI and/or Banco Português de Investimento have participated, as a syndicate member and/or providing assistance services to the issuer/ offeror, in the capital market operation of Mota Engil and to Sonae SGPS in the context of the IPO of Sonae MC that was not executed due to the withdrawal exercised by Sonae SGPS. Banco Português de Investimento has participated providing assistance services to Ibersol on the acquisition of the entire share capital of Eat-Out Group. Banco Português de Investimento provided financial advisory services to Impresa in 2017. In November 2016, Banco Português de Investimento acted as a Joint Bookrunner in the private sale performed by “Amorim International Participations, BV” and “Investmark Holdings, BV” of 13.300.000 shares of Corticeira Amorim, representing at such date 10% of Corticeira Amorim's share capital, through an Accelerated Bookbuilding process. In November 2007, Banco BPI has celebrated an "Equity Swap" contract with Sonae Investments with strictly financial settlements (Cash Settled Share Swap Transaction), to cover the inherent risk in the acquisition of 6.64% of Sonae's share capital, at a price of €2.06 per share. In this contract, the periodic repercussion over Sonae Investments of the amounts corresponding to Sonae share price changes relative to the above-mentioned price was agreed as well as the amounts equivalent to the proceeds to be received by Banco BPI under the exercise of rights inherent to these shares. The contract had a maximum maturity of 3 years, and it was successively extended on October 2010, November 2013, November 2014, and November 2015. In November 2016, this contract has been extended for an additional 12 month period, up until November 2017, automatically extended for successive 12 (twelve) month period if neither party notifies to the non-renewal. Till November 2017, neither party notified the non-renewal, and therefore the contract was automatically extended for an additional 12 month period, over currently a total of 104,442,164 SONAE shares, corresponding to 5,22% of its share capital.

CaixaBank may provide corporate finance and other investment banking services to the companies referred to in this report.

CaixaBank Group, members of the board, or CaixaBank Group employees, may hold a position or any other financial interest in issuer's covered by CaixaBank Equity Research, subject to change, which shall be disclosed when relevant for assessing the objectivity of the recommendation. At the date of the Report CaixaBank and/or its group companies directly or indirectly owned a net long position of at least 0.5% of the capital stock of the following companies whose shares are listed on an organised market and which may be covered in this report: Repsol S.A., Telefónica, S.A., Banco Portugués de Investimento SGPS, S.A., Erste Group Bank, Deoleo, S.A., Mobiliaria Monesa, S.A, ACS Actividades de Construcción y Servicios S.A., Cleop, S.A., General de Alquiler de Maquinaria, S.A. Libertas 7 and Gigas Hosting, S.A.. Amongst the companies covered, BPI Group has qualified stakes in Impresa, The Navigator Company and Sonae SGPS.

CaixaBank is a market-maker or liquidity-supplier for the following shares: Reino de España, Eroski. Over the last 12 months CaixaBank has participated in security offerings for the following issuers: Aedas Homes, ICO, Principado de Asturias, Grupo Antolín, VE Sonnedix Finance, X-Elio, Barclays, Atlantia, Red Eléctrica de España, Bank of América, CaixaBank, HSBC, Reino de España, Banco Santander, Credit Agricole, Iberdrola, Goldman Sachs, Electricidad de Portugal, Credit Suisse, Telefónica, Gas Natural, S.A., FADE, Deutsche Bank, Suez Environnement, Prosegur Cash, Neinor Homes, BNP Paribas, Gestamp, Unicredit, Cellnex, LBBW, Redexis, Applus Services, Cortefiel, Repsol, FCC Aqualia, T-Solar UBS, Societe Generale, Metrovacesa, Commerzbank, Citigroup, Audasa, Inmobiliaria Colonial, Indra, Compagnie de Financement Foncier, NOS, Quabit Inmobiliaria, Enel, eDreams, el Corte Inglés, EDP, Sonae SGPS (finally withdrawn), Compañía Española de Petroleos S.A.U. (finally withdrawn), Prologis, Solarpack. Furthermore, CaixaBank or companies in its Group have provided or currently provide commercial banking and investment banking services, including financing, to all companies that CaixaBank covers in its reports or which are covered in the reports that CaixaBank redistribute, in the natural course of its business operations.

CaixaBank's activity is supervised by both Banco de Portugal (the Portuguese Central Bank), in relation to its Portuguese branch, and by the CMVM (Stock Exchange Regulator).

This research report has been prepared and is issued exclusively by CaixaBank under its sole responsibility.

As of 7th January 2019 (“Relevant Date”), Banco Português de Investimento, S.A. (“BPI”) investment banking activity, including the area of equity research has been taken over by CaixaBank as part of the transaction announced on 23 November 2017. Therefore, the relevant recommendations and matrix used for the Reports are the one used by the BPI until de Relevant Date, and references to the last 12 month recommendations shall be considered to be made to CaixaBank Reports from the Relevant Date and to BPI’s Reports before the Relevant Date.

INVESTMENT RATINGS AND RISK CLASSIFICATION (12 MONTH TOTAL RETURN): INVEST MENT RAT INGS STA TIST ICS

Low Risk Medium Risk High Risk

Buy >15% >20% >30%

Neutral >5% and < 15% >10% and <20% >15% and < 30%

Underperform < 5% < 10% < 15%

These investment ratings are not strict and should be taken as a general rule. Risk rating (“Low”, “Medium”, “High”) is defined based on two criteria: Blended cost of equity (relative approach within coverage) and a Qualitative assessment (analyst evaluation of the factors affecting the investment risk, which are not captured by the valuation methodology).

CAIXABANK, S.A.

Portuguese Branch Madrid Office

Rua Tenente Valadim, 284 Pº de la Castellana, 51-5º 4100-476 Porto 28046 Madrid Phone: (351) 22 607 3100 Phone: (34) 91 557 6941

As of 31st January investment ratings were distributed as follows (1):

% Total (1) % IB Services (2)

Buy 48 5 Neutral 31 7 Underperform 13 0 Accept Bid 1 0 Under Revision/Restricted 7 17

Total 100 (1) The information included in the table is relative to the last recommendation issued as of the mentioned date for each of the companies under BPI Equity Research coverage. (2) IB Services refers to the percentage of recommendations within each rating category related with companies to whom BPI Group provided relevant investment banking services within the last 12 months.

http://www.bpiequity.bpi.pt/

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