Jefferies improves Aena's price to 195 euros after its surprising results

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By TP

The quarterly figures of Aena They have convinced Jefferies. The Spanish airport manager, who practically doubled its profits between January and March (+95%, 261 million euros)has received a price improvement from the American firm, which places the target price of its shares at 195 euros from the previous 188; With respect to the latest closing prices, this valuation represents a 14% upside potential for the listed Spanish company. Likewise, these experts reiterate their advice to 'keep' the value. For Jefferies, First quarter EBITDA, which was 17% above forecast, «confirms strong revenue momentum and strict cost control of Aena, with significant benefits in operating leverage.» «We increase our estimates between 2 and 4%, as we expect similar movements against, and we raise our valuation. The value is well valued, but we expect a positive reaction«, they emphasize from the New York company.

5 KEY POINTS

The Jefferies report argues for this more positive view of the company in five main conclusions obtained from the conference with shareholders of the airport manager. The one that stands out the most is that the company has focused on the «upper end» of forecasts, since Aena «targeted +7.1% at the upper end of the 2024 forecasts provided in March for traffic, after +13% in the first quarter.» «The April trend is slower, with a single-digit increase, and is affected by the Easter calendar, but Aena indicated a revision of the forecasts in the first semester, once more data is available,» they explain. Second, Jefferies points out that the awarding of your vehicle rental contract to Hertz, Sixt and Europcar will be a positive catalyst for the company, which expects to earn up to 23% more for the 'rent a car'. The award is for a period of 5 years with the option to extend for another 2 years. The control of energy costs is also another point that these analysts highlight in their analysis. In this sense, Jefferies points out that Aena reduced energy costs by 25% in the quarter, which allowed EBITDA to be boosted above consensus expectations. «After the volatility of 2022, We consider it positive that Aena maintains its commitment to reach around 50% coverage for the period 2024-25 and pursue a power purchase agreement (PPA) to further cover costs,» they point out. On the other hand, Jefferies indicates that the minimum annual guaranteed (MAG), the base fee paid by tenants of stores at its airports, have boosted retail sales. «Rents for retail lines contracted 1% in the quarter, impacted by 'Duty Free' and temporary closures due to construction. These are expected to conclude in the summer, while the Canary Islands have already shown themselves to be particularly strong, recognizing variable rents under the new MAG agreements,» they add. Finally, Jefferies highlights the reduction of international investments, which boosted the strength of free cash flow, which benefited from the amortization of investments in Airports of the North East of Brazil (ANB), with the mandatory works already completed. «At BOAB there were no major investments in the first quarter nor are they planned for 2024, with construction planned from 2025. We observe that the free cash flow further reinforces Aena's balance sheet (1.6 times), which offers potential margin for mergers and acquisitions,» they say. Aena reported a net profit between January and March of 261 million euros, which represents an increase of 95.35% compared to 133.6 million in the same period last year. For its part, turnover has increased by 20.1% year-on-year, up to 1,233 million euros. This improvement in income is supported by an increase in the group's passenger traffic in all the markets in which it operates up to 74.6 million, which represents 11.9% more than between January and March 2023. In airports in Spain, the increase has been 13.2%, up to 60 .8 million passengers.