Davy Morning Equity Briefing
Aug 04, 2020
Irish manufacturing PMI rises to 57.3
This morning’s Irish manufacturing PMI has increased to 57.3 in July, signalling a sharper recovery than in other European countries. The PMI readings mirror the resilience of official industrial production data for Ireland (up 9.3% year-on-year in the three months to May). That industrial output was still registering positive annual growth reflects the pharmaceutical sector, benefitting from COVID-19, but with more disruption among indigenous firms.
H1 2020: conservative provisions; better activity levels
While capital was weaker than expected, this is due to a conservative approach to both provisioning and the risk weighting of payment breaks - some of which should unwind as customers return to contracted repayments. Elsewhere, new lending mortgage market share was reassuring, while the rebound in activity levels in recent weeks will also be welcomed.
Q3 performance in line with expectations
As anticipated, easyJet produced a loss in Q3 of -£324.5m but expects a smaller loss in Q4 with capacity planned at 40% (previously 30%) The statement indicates that late summer bookings are performing well, with liquidity raised to date since the beginning of the COVID-19 pandemic to over £2.2bn.
Leveraging the balance sheet to grow in a weak market
The scope of Wizz’s ambitions is underlined by its accelerated delivery schedule at a time when the broader airline space is releasing available capacity. This will incur price investment and our FY22 estimates are nudged down accordingly, but the long-term benefits are clear. We remain fans of this long-term potential but see the path as bumpy and the stock as fairly priced. We retain our ‘Neutral’ recommendation and £34.0 price target.