Vinci Earnings: Operating Income Growth Impresses Once More; Shares Attractive

Narrow-moat Vinci reported first-half operating income growth of 9%, ahead of its 4% revenue growth during the same period. Operating income growth was hit by a newly introduced tax on long-distance infrastructure in France, which hit its autoroutes division by EUR 120 million. The recently imposed tax, combined with political uncertainty in the region continues to drive the mismatch between the group's earnings growth and subdued share price performance. Shares appear attractively priced, trading at a 20% discount to our EUR 133 fair value estimate, which we maintain. As mentioned in our June 10 note “Surprise French Election Reintroduces Political Risk for Toll Road Operators,” we believe this risk is overstated and presents a buying opportunity for investors, with shares trading at a compelling dividend and forward free cash flow yield of 4% and 8%, respectively.