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28 Jul 2022
The worst likely behind
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The worst likely behind
- Published:
28 Jul 2022 -
Author:
Palomo Manuel MP -
Pages:
11
Ordinary EBITDA 1H22 -1.6% (reported +5%), broadly in line
The weak, although expected, operational performance at the consolidated level was explained by the poor performance of Italy (-19% YoY) explained by its Supply business (-75%). This was only partly offset by the strong performance of Iberia (+5%) and Latam (+31%) mostly thanks to Brasil (+77%), Colombia (+31%) and Peru (+31%).
1H22 Ordinary NP (EUR2.1bn, -8.3%) and reported (EUR1.7bn, -4.8%) both below expectations
Net Profit was impacted by the increase in DandA (+29%) on higher capex, adjustments related to assets held for sale (EUR0.6bn) and write downs of receivables (EUR0.17bn). Financial charges remained under control (-4%) while taxes (-16%) and minorities (-47%) showed a significant decline.
FY22 financial targets reiterated. FY22e ND expected at EUR61bn
Enel reaffirmed its FY22 targets (EUR19.0-19.6bn Ord EBITDA, EUR5.6-5.8bn Ord NP and EUR0.4 fixed DPS) which are aligned with consensus'' estimates. We note the ordinary figures will not include the expect EUR0.7bn capital gain from today''s announced sale of Chilean transmission assets. The negative came again from the ND outlook which is now seen at EUR61bn by FY22e and assumes no additional regulatory impacts (on top of the current EUR2.6bn; o.w. EUR2.2bn Italy, Eur0.2bn Spain and EUR0.2bn Romania), almost EUR2.9bn WC improvement in 2H22 and EUR4.0bn divestments in the period (of which Russia, Fortaleza and Chilean transmission amount to 50%)
TP revised downwards - However positive risk-reward
We trim down our TP on higher debt estimate (in line with the EUR61bn target), higher cost of capital and MTM for subsidiaries in our SOTP. However, Enel is trading at 2023 8.2x PE and 7.1x EV/EBITDA. In our view it is simply cheap, despite admitted concerns about its FCF generation which might get exacerbated by further regulatory intervention. Nevertheless, we believe that the re-pricing of contracts will lead to a major margin...