REP
🛢️ Repsol achieved record profitability levels between 2021 and 2023, significantly reducing debt and buying back 25% of its shares.
📉 The company’s value has decreased by 30% compared to 2019 levels, despite a stronger balance sheet and shareholder distributions.
💰 Repsol announced a strategic plan (2024-2027) to invest €17-19 billion net, which the market currently undervalues.
🏭 The company has high market share in gas stations in Spain and Portugal, and is the largest bread seller in Spain.
@Academiadeinversion:
“Repsol is a fascinating case. With the war in Ukraine, it’s not that they won the lottery, but they achieved record profitability levels. Repsol, from 2021 to 2023, their results exploded. They reduced debt to minimal levels, almost taking it to zero. They managed to reduce capital by 25% by buying back shares. During this period, they also sold a minority stake in their oil and gas business, upstream, which is the more traditional commodity oil and gas business. The implicit valuation given to that business already covered 100% of the company’s value. The stock, I’m not saying it hasn’t done well, because of course, from 2020 when it went to €5, now it’s at 12, but the company’s value has decreased by 30% compared to the levels it was trading at in 2019, which is fascinating because, at the balance sheet level, it has been reconverted, as we mentioned. Capital has been reduced by 25% via buybacks, and a significant amount of dividends has been distributed, which accumulated would be 30% of the company’s value. However, the stock is still devastated. It is still at levels that they themselves say they are very surprised by. Thanks to this very solid balance sheet position, they announced a strategic plan from 2024 to 2027, in which they basically say they are going to invest between 20-22 billion euros net of sales, also in CAPEX. Basically, people don’t realize that this is what the company is worth. When I say worth the company, I mean both the market capitalization and the debt. It’s like the current price discounts that this CAPEX is being thrown away as if every investment you make will be worth nothing, and that is outrageous, considering the balance sheet they have, distributing the amount of dividends and buybacks they are making to shareholders, and really finding industrial opportunities that can really do well. The conversion of refineries to refineries that emit much less CO2, developing new generation fuels that are much less CO2 emitters, all these types of trends. They also have really excellent assets outside of Spain. We are also talking about the company with the largest market share by far in distribution, basically in gas stations, in all of Spain and Portugal. You start to add up all these types of things. A very curious fact is that Repsol is the largest baker in this country, the one that sells the most bread in this country is Repsol. The margins they achieve in the retail business units, buying and selling products, are super high, and yet people don’t look at it because Repsol is based a lot on a specific variable, which has a greater weight in the refining margin variable, which is the margin of refining crude oil into gasoline and diesel, and that is the main variable that moves the company. Since that is going down because Russia seems to be entering the European market with its diesel product, and the market has normalized, nobody buys it. But of course, it is at completely ridiculous valuations. The thesis is that we also see a very boring management, as they say, in which they are going to dedicate themselves to their CAPEX and to rewarding shareholders, which is what they have been doing for the last 5 years, but people, I don’t know why, ignore the CAPEX as if they were throwing it away.”
Watch the exact part of the YouTube video where Jorge talks about Repsol here:
View the video on YouTube.
Read more articles featuring the most recent analysis of Repsol (REP) at this link: REP stock.
