S&P hikes Repsol rating to BBB+ from BBB after company strengthens balance sheet amid high raw material prices


Renta 4 | S&P has raised its rating on Repsol from BBB to BBB+, while maintaining its A-2 in the short-term, with a stable outlook. The ratings agency has based its move on a backdrop of high raw material prices, divestments and Repsol’s prudent financial policies to strengthen its balance sheet and improve credit measures.

S&P flags that the market situation will favourably affect the company throughout the cycle. This will allow it to continue to strengthen its balance sheet and reduce net debt, even in an environment of normalisation of prices and refining margins. Whatsmore, the agency has pointed out that FFO/Debt will be at levels well above 50% throughout the cycle, noting that in the short term it could be over 60%.

Valuation: Positive impact. S&P raises its rating for Repsol from BBB to BBB+, on the strength of its balance sheet against a backdrop of high raw material prices, the policies implemented by the company in this atypical market scenario, cutting debt via the cash generation registered during the period. In addition, there are the funds from the sales of minority stakes in the Upstream and Low Carbon business. As we have previously commented, Repsol is in an idylic situation to carry out its transition in an environment of high economic uncertainty.

We reiterate our OVERWEIGHT stance, with a T.P. of 18,9 euros/share.

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