Mapfre: 85% of improvement in post tax profits should come from Brazil and US

The mutualist roots of Mapfre has not let it keep up with the rest of the sector

Banc Sabadell | We analyse Mapfre’s strategic plan for 2018-19, concluding that its target of average ROE 19-20 of 20% is achievable, given that it would imply post tax profits of around 940 million euros and we forecast that it could best this.

That said, our estimate is that 85% of the improvement in post tax profits would need to come from Brazil and the US, and especially from the car sector, where the competitive situation is complicated. On the positive side, the solvency and balance situation has improved and we see no risks in the DPA which implies a yield of >6%.

We revise our post tax profit forecasts for 2019-20 c. -15% (we are c. -5% compared to the consensus) and we reduce the O.P. to €2.66/share (-7% compared to previous forecast; 3% potential). We believe that the value is optimized in the price, and although the high yield supports the share price, it is not an isolated case in the sector (we prefer AXA with similar yield and better delivery). We reiterate SELL.