Renta 4 | Against the current backdrop of uncertainty, Iberdrola has decided to make a small a shift in its investments’ strategy, giving increased priority to investment in networks vs renewables, with respect to the firm’s previous plan. In the period 2023-2025, it estimates investing 47 billion euros (84% for growth). This is very similar to the investments forecast in the previous plan, although 57% will be earmarked for networks and 38% for renewables (previous plan had 40% and 51% respectively).
High prices and the strength of the currencies prompts the group to raise its long-term objectives…
It has raised the EBITDA 2025 target to 16.5-17 billion euros (previous target 15 billion euros, R4e 15.855 billion, consenso FactSet 14.956 billion) expecting 50% to come from the Networks business and the other 50% from Production and Clients. This operating improvement also allows for a hike in the net profit target, despite the increase in financial costs, to 5.2-5.4 billion euros (previous target 5 billion euros, R4e 4.902 billion, consenso FactSet 4.664 billion).
… this allows the company to hike the dividend, while maintaining the pay-out.
Maintaining the pay-out at between 65% and 75%, hoping to distribute a dividend of between 0,55 euros and 0,58 euros/share in 2025 (higher than the estimate in the previous plan of between 0,53 and 0,56 euros/share), a dividend yield of more than 5.5%.
It also has a plan for divestments to preserve its balance sheet.
This more prudent focus is aimed at preserving its balance (ND/EBITDA 2025e at 3,4x s 4x R4e). To this end, it also has an asset rotation plan and/or one for the incorporation of financial partners via minority stakes, to the tune of 7.5 billion euros, without taking into account any capital gains. This strategy, along with the generation itself of operating cash, will finance close to 80% of the plan.
Conclusion: We are revising our estimates upwards, as well as our Target Price. We reiterate our Overweight stance.
We are raising our T.P. to 13,57 euros/share (vs 12,73 previously). Although we believe certain caution is needed in the short-term while the current context (hikes in rates to control inflation) lasts, we see Iberdrola as an attractive long-term investment.
