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ACCIONA: 1Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results:
Reported EBITDA: € 325.0 M (+11.3% vs. +7.1% BS(e) and +7.2% consensus);
Reported EBIT: € 207.0 M (+45.8% vs. -3.0% BS(e) and +9.2% consensus);
Reported Net Profit: € 78.0 M (+6.8% vs. -47.0% BS(e) and -17.8% consensus).

The 1Q’20 results were affected by the Covid-19 crisis and came in slightly below expectations in LfL EBITDA, although slightly better in NFD. Thus, LfL EBITDA (adjusted for a one-off impact on the operating equity results that, starting this quarter, are accounted above the EBITDA line) was -2.8% below our expectations and those of the consensus, meaning a -4.1% drop vs. 1Q’19 in LfL terms (+11.3% on reported EBITDA without restating the 2019 figure).
The Energy division (62% of EBITDA’19) would have been -7% below our estimate in LfL EBITDA, with a -6% drop vs. 1Q’19, due mainly to a pool price in Spain that was -36% lower (as a result of the falling demand brought about by Covid-19) and the adjustments to remuneration on the investments in Spain stemming from the last review of remuneration terms by the Govt. (€ -50 M BS(e) for the full year). Separately, Infrastructures (32% of EBITDA’19) came in -4% below expectations, meaning a -17% drop vs. 1Q’19 in LfL EBITDA (adjusted for ATLL), due mainly to the drop in Construction (-47% vs. 1Q’19, hit by Covid-19 especially on the Services division). Other activities (6% EBITDA’19) beat our expectation by +112%, thanks especially to the better performance in the real estate business. Net Profit totaled € 78 M, meaning an +8% increase vs. 1Q’19, but on the underlying LfL level it fell -46% (vs. -46% BS(e) and -18% consensus).
NFD increased by €~300 M vs. Dec’19 (+6%) to € 5.62 Bn (including €+421 M from the IFRS 16 impact), which stands above our estimate (€ 5.74 Bn), thanks to better performance in working capital and other positive cash flows (on derivatives and FX). The NFD/EBITDA ratio from the past 12 months came in at 4.1x. In this regard, the company admits that the NFD/EBITDA’20e might exceed the maximum levels established by its financial policy (4x, among others) and forecasts (at present) a drop of around -15% in EBITDA’203 vs. 2019. Thus, the company expects 2Q’20 to be the worst quarter of the year, and forecasts gradual recovery in 3Q and 4Q. For this reason, the company is readying a Pandemic Protecion Plan consisting in: (i) increasing liquidity levels (adding around €+900 M in available loan facilities between March and April; and extending debt maturities), (ii) cutting the dividend by -50% (already announced); (iii) implementing cost-saving measures totalling €~100 M in 2020; and (iv) reducing CAPEX net of divestments by -50% to € 500 M, among other measures.
With the revision of estimates we plan to carry out in our scenario of V-shaped recovery (assuming two quarters of deep recession with a moderate recovery in the 3Q, strong in the 4Q and very strong next year), our EBITDA estimate’20e would mean a -15% drop vs. 2019, although including the cost savings announced by the company it would come in -7% vs. ANA’s -15% guidance, leaving the T.P. at € 92.00/sh. (+9% upside; -5% vs. previous T.P.). In our scenario of U-shaped recovery (2 quarters of deep recession, with lacklustre growth in the 3Q and 4Q and strong recovery next year and the second year; recovery in 18-24 months), the drop in EBITDA’20e would stand at -16% (assuming savings) and our T.P. would fall to € 86.00/sh. (+1% upside, -11% vs. previous T.P.). In both cases the upside is not sufficient. Conference call at 10:00 (CET). SELL. Target Price: € 97.20/sh (upside 14.56%)
With this in mind, we expect a slightly negative market reaction, especially after ANA’s+6% outperformance vs. the IBEX since February’s highs (when the impact from Covid-19 started on stock markets; +21% YTD).