Short-term pain, but growth not priced, Buy Suez/Veolia (off CL)
Reiterate Buy on Suez; strong growth outlook to be reflected in higher valuation multiple
With inflation/economic growth data expected to turn to more positive, cost-cutting likely to be strengthened and extended over time, and a structurally positive outlook on waste/water activities in emerging markets, we expect valuation multiples to rerate to reflect the strong growth outlook we forecast for Suez (5% 2017-19E EBITDA CAGR and 13% EPS CAGR). Any indication that Engie may revise its stake m/t would also act as a positive catalyst (our price target includes an M&A component at a 15% weight).