The toughest quarters for inflation impact are still to come Inflation and the capacity of the companies to deal with it will be one of the key areas of focus in the coming quarters. In this report, we analyse the various impacts, sorting for those companies most at risk: Vidrala (energy costs), Prosegur (labour costs) and Ebro (raw materials). While Spanish names continue to underperform, our top picks did well In 2021 Spanish Mid Cap names underperformed vs Europeans by 8% (despite outperforming them in the latter part of the year). Spanish names are currently trading with their highest discount to European Mid Caps in the last 5 years. Our tops picks outperformed Europeans by 6%. In this report, we analyse the exposure of ESG funds to our coverage and identify new opportunities, notably Gestamp (good ESG rating but not held by ESG funds). We are becoming more cautious ahead of Q4 We have downgraded ROVI and Almirall to Neutral. Currently we have Outperform ratings on 41% of our stocks, one of the lowest figures in recent years. We believe Q4 could bring negative surprises, as companies will start to suffer from both serious inflation (with no time to pass it through) and a tough comparison, notably Vidrala, Fluidra and Audax. We maintain our 5 key names: Applus, CAF, Gestamp, Logista and Viscofan We maintain our 5 top picks. Applus (disposal of the non-profitable businesses and IDIADA tender); CAF (strong order intake and good execution at low prices), Gestamp (outgrowing auto production recovery trading with no premium), Logista (cheap name waiting for acquisition opportunities) and Viscofan (massively derated despite good earnings evolution). We also propose some pair trades Despite liquidity being an issue in some cases we propose pair trades among our coverage: Viscofan over Ebro; Verallia over Vidrala; Prosegur Cash over Prosegur; and Gestamp over CIE Automotive.