Bankinter : Iberdrola’s 9M 2024 results beat consensus estimates. Earnings excluding capital gains from the sale of assets in Mexico increased by 18% versus 13% estimated. Positive factors:
(i) Growth in the regulated asset base in networks and tariff revisions;
(ii) Improvement in the commercialisation margin and
(iii) Record hydroelectric generation and new capacity in renewables. These factors more than offset the lower contribution from the gas business and the absence of some non-recurring revenues recorded in 2023.
As for guidance for the year, the management team gives a little more detail. It now expects ordinary BNA of €5.5bn (up 14.5%) versus double-digit growth previously. The interim dividend increases by 14% to €0.23/share, also above estimates.
Following these results we maintain our Buy recommendation. Reasons:
(i) Sound strategic positioning. The group is a clear winner in the process of greater electrification and rapid decarbonisation that the new energy model is facing. Its positioning in grids and renewables, geographic diversification and solid financial structure allow it to capture the opportunities in the new energy transition scenario;
(ii) Growth. The 2026 Strategic Plan envisages mid/high single digit growth in NAB in the period 2023-2026. Iberdrola acknowledges that the likelihood of an upward revision of the Plan’s targets is high, as the evolution is better than expected one year ahead of the initial guidance. The next update will be in autumn 2025;
(iii) Shift towards a more visible and less volatile business profile. On the one hand, most future investments are directed to the network business which is subject to predictable regulatory frameworks. On the other hand, in the generation business it is increasing long-term contracts (PPAs) so as not to depend on market volatility;
(iv) Attractive valuation ratios: PER 2025 of 15.5x and 4.70% dividend yield. We raise the Target Price to €15.90/share by December 2025 from €14.50/share with the improvement in estimates.
