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ACCIONA: 9M'19 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results:
EBITDA: € 274.0 M (+3.4% vs. -1.7% BS(e) and 0.0% consensus);
EBIT: € 122.0 M (+13.0% vs. -7.9% BS(e) and -4.2% consensus);
Net Profit: € 58.0 M (+61.1% vs. -25.6% BS(e) and +28.9% consensus).
9M'19 vs. 9M'18 Results:
EBITDA: € 933.0 M (+5.7% vs. +4.1% BS(e) and +4.6% consensus);
EBIT: € 461.0 M (-9.3% vs. -13.7% BS(e) and -12.9% consensus);
Net Profit: € 213.0 M (-4.1% vs. -18.1% BS(e) and -9.3% consensus).

The 9M’19 results were slightly better than expected in EBITDA, but worse in net debt due to higher CAPEX levels (which could mean higher growth rates going forward). Thus, on the YTD accumulated level EBITDA stands +1.5% above our estimate (+1.1% vs. consensus), meaning a +5.6% increase vs. 9M’18, and on the LfL level, according to the company’s definition (excluding divestitures and the impact from IFRS 16), growth was +14.7%, which would be above its guidance of “high single digits”.
Differences in the definition of LfL EBITDA. Our LfL growth estimate does not include the impact from the Sydney Light Rail agreement as recurring (around € +100 M BS(e)), as at the time the guidance was released, the agreement had not yet been announced. In this regard, according to our definition, LfL growth accumulated through 9M’19 would stand at +1.7% vs. our estimate of +5% for all of 2019. This means that 4Q’19 EBITDA would have to grow by around +10% in order to reach our estimate of +5% for the full year, which at first glance we see as demanding based on the new renewable energy capacity expected to be installed and the performance of the rest of the businesses.
The Energy division (65% of EBITDA’19e) would have come in slightly above our estimate (+2.6%), whereas Infrastructures (28% of EBITDA’19e) is -2.4% below. Although its proportion of the consolidated total is small, Other Activities (7% of EBITDA’18) is +23% above our estimate, due especially to better performance in the real estate business. Thus, EBITDA reached € 933 M through 9M’19, meaning a +130bps increase to the margin vs. 9M’18 (17.6% vs. 16.3% in 9M’18), thanks largely to the impact from the aforementioned agreement in the Sydney project, which we think is providing a larger margin.
Net Profit stood at € 213 M, meaning a -4% drop due to the divestitures made over the past quarters, which was better than expected (-18% BS(e) and -9% consensus) thanks to lower provisions and better equity-method results.
Net debt rose by €~833 M vs. Dec’18 to € 5.37 Bn (including €+209 M from the IFRS16 effect), € 175 M above expectations (€~5.2 Bn BS(e) and consensus), due especially to increased investments. The NFD/EBITDA ratio of the past 12 months came in at 4.2x, slightly above the guidance of 4x for the end of the year. The company has reiterated the guidance for the full year.
We expect a neutral or very moderately positive market reception since the results came in slightly above expectations in EBITDA. We downplay the rise in debt, as this would be due mainly to higher CAPEX levels and the company has reiterated its leverage guidance for the full year. The stock has underperformed the IBEX by -9% in the last month (+16% thus far this year). There will be a conference call at 10:00 (CET). SELL. T.P. € 81.65/sh. (-11.96% potential).