Inditex Is Indeed One Of The Top Picks Of Speculation Banks

If there is a value for which the war in Ukraine due to its exposure to Russia and the inflationary environment have marked a before and after on the floor, that has been Inditex . The textile is the second most punished value so far in 2022, with losses of 23%, a period in which analysts have cut their profit forecasts by 15% for this year to 3,470 million euros for the year tax 2022-2023.

But May has been a turning point for its titles, which have closed the month with increases of more than 11% and have signed their best record since February 2021 . An advance that has allowed it to recover nearly 7,000 million euros of capitalization in the last month, hot on the heels of Iberdrola as the largest listed Ibex 35 by size, of which it is just under 500 million.

This rebound is only confirming the opinion that the punishment that the Galician has been receiving in the stock market in recent months is disproportionate. In this review, the firm has gained more weight in the portfolio prepared by elEconomista from 50 analysis firms from which the indicator is fed and to which it returned in September 2021.

Although its weight is equally weighted within the index, the weighting of Inditex has gone from 3.98% in March to 5.92% today. An increase with which it closes the gap with Repsol , which is once again the favorite, although it has lost weight, going from 9.6% three months ago to 8.7%.

From the annual highs that its price reached in January at 28.66 euros, defending profit multipliers of around 25 times, today its share is trading around 20% below those levels. In this way, its PER (number of times the profit is included in the share price) has been reduced to 19.8 times, which represents a discount of 10.5% compared to its main peers in the sector. Likewise, the consensus has given him back the buy advice compared to the hold that he received at the beginning of the year.

XTB, which has decided to include it in its portfolio for this quarter, justifies its decision as follows: “Inditex is a thermometer of the retail sector and therefore of the real situation of consumers who have seen how inflation has reduced their purchasing power. Supply chains continue to be a problem in a sector that produces almost all of its products in Asia,” says XTB, which has opted for textiles in its portfolio .

“On the other hand”, they add, “in the Asian market and specifically in China, the restrictions and confinements have weighed down sales, even online , given the impossibility of being able to make deliveries. With the recent reopening we could see a better performance in the face of a improved expectations for this quarter”.

Waiting for your results
On Tuesday Inditex will communicate the figures corresponding to its first fiscal quarter and that will serve to quantify in its accounts the effects of the war, cost increases and weaker demand. “We forecast local currency sales to rise a solid 23%. Although this would be a slight slowdown compared to the already announced 33% growth between February 1 and March 13, we believe this represents an impressive performance in terms of in absolute terms and seems to show that the mid-single-digit price increase passed on to customers earlier in the year has had no impact on volume growth,” Barclays notes.

For JP Morgan, short-term business results aside, consumer prospects are uncertain and retailers face continued inflationary headwinds. “Although Inditex is not immune to these pressures, we continue to see it as the best of our coverage and, in fact, we consider that the strength of its business model has been extended, rather than reduced from the pandemic,” they point out.

CIMA Capital’s portfolio is the most profitable this year
The explosive cocktail of war, runaway inflation and massive stimuli in the last three months of 2022 has not prevented 44 of the 50 portfolios with which the Eco10 is built from having positively resisted since the portfolio started on November 30 until last may 31.

Among them, the portfolio that offers the greatest increases is that of CIMA Capital, with 41.1%. The firm has relied on Ence and Tubacex during this period , which have been the securities that have provided the highest returns, with 65% and 53%, respectively. But also in Elecnor , which to date had bounced 29%, Grifols with 27.5% and Prosegur Cash with 26%. Looking ahead to this quarter, they have decided to keep it practically the same, except for the replacement of Ence by Iberpapel .

After CIMA, the most bullish portfolios in the second quarter of the Eco10 have been those of Auriga and Azvalor, which have added 32% and 27%, respectively.

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