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29 Jul 2021
Not out of the woods
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Not out of the woods
- Published:
29 Jul 2021 -
Author:
Palomo Manuel MP -
Pages:
11
Underlying operational performance (ordinary) remains weak, reported even weaker
The decline in Ordinary EBITDA (-5% YoY) is largely explained by Iberia (-20% YoY, please see ENDESA: Weak underlying results, but FY21 guidance reiterated) and Latam (-4% vs -16% in 1Q21). Despite the relative improvement of the latter, we note EBITDA amounted to EUR984m, similar to 1Q21 (EUR897m). There was a positive contribution from Italy (+2%), supported by the strong Supply (+8%) and North America (+3%). At the consolidated level, complete recovery is not evident yet. Ordinary EBITDA stood at ~EUR4.2bn both in 1Q and 2Q 2021. We note the company accounted EUR0.6bn restructuring charges; reported EBITDA stood at EUR7.7bn for 1H21.
Ordinary NP (+1%), reported -9%. Debt on the rise (EUR50bn)
The difference between Ordinary NP (EUR2.3bn) and Reported (EUR1.78bn) is largely explained by the restructuring charges (EUR0.4bn) and impairments (EUR0.2bn). Enel confirmed it will use the EUR1.7bn gain from Open Fiber (considered ordinary) to achieve the FY21 guidance. We highlight the significant increase in the net debt figure from EUR45.9bn in 1Q21 to 1H21 EUR50.4bn, which might raise concerns about Enel''s FCF generation capabilities.
A big gap to fill in order to achieve long-term guidance
We expect the FY21 guidance to be achieved on the EUR1.7bn gain from the sale of Open Fiber. However, the weak underlying performance points to significant earnings risk in 2022-23. Enel management stated it plans to fill the gap thanks to: 1) renewable additions, 2) additional capex, 3) Next Gen EU funds and 4) a more favourable power price environment. In our view, FY22-23 guidance looks too challenging; thus we stand well below company guidance (-12% on 2022e EPS).
Be wary of regional variations. Reiterate Underperform
Looking at consensus valuations, we see our multiples for OECD countries'' activities in line, if not above. However, we assume much lower valuations for...