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ACS: 1H’23 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'23 vs. 2Q'22 Results
Sales: € 8.922 Bn (+5.1% vs. +4.2% expected);
EBITDA: € 472.0 M (+13.2% vs. +9.6% expected);
EBIT: € 337.0 M (+27.7% vs. +17.8% expected);
Net Profit: € 222.0 M (+14.4% vs. -5.2% expected);
1H'23 vs 1H'22 Results
Sales: € 17.033 Bn (+10.5% vs. +10.0% expected);
EBITDA: € 934.0 M (+14.5% vs. +12.6% expected);
EBIT: € 665.0 M (+21.6% vs. +16.8% expected);
Net Profit: € 385.0 M (+16.7% vs. +5.2% expected);

Yesterday the company released 1H’23 results very much in line with expectations in sales and slightly better in EBITDA (+2% vs. BS(e)), with net debt coming in better than expected (€ 1.65 Bn vs. € ~2.3 Bn BS(e)) due higher operating cash flow and other non-operating effects. Most of the figures were already known following the release of Hochtief’s (70% ACS; 65% EBITDA’23e) and Abertis’s results (44% ACS; 11% EBITDA’23e), although in the rest of the divisions EBITDA was in line or slightly above expectations.
Sales rose +10% vs. 1H’22 (+12% adjusted for FX), with the performance in line or slightly better than expected in all operating divisions. EBITDA reached € 934 M (+15% vs. 1H’22), with margins very much in line in Hochtief ex-Abertis (+10bps vs. BS(e) and -10bps vs. 1H’22; already known after Hochtief’s release) and in Dragados (+10bps vs. BS(e) and -60bps vs. 1H’22), and inS ervices (5.6% and +20bps vs. 1H’22), with Abertis improving its contribution (€ 106 M already known vs. € 64 M in 1H’22). Concessions (ex Abertis) almost tripled its EBITDA from 1H’22 thanks to the consolidation of the SH-288 and the solid performance from Abertis. The consolidated EBITDA margin came in at 5.5% (vs. 5.4% BS(e) and vs. 5.3% in 1H’22).
Net Profit stood at € 385 M (+17% vs. 1H’22), above expectations (€ 347 M BS(e)), due partially to the better EBITDA although we downplay this figure (Net Profit) due to the large amount of elements affecting it, and which do not translate onto cash.
Net debt totalled € 1.17 Bn (0.6x NFD/EBITDA over the past 12 months excl. IFRS16 and factoring, and vs. € -225 M of net cash in Dec’22), improving our estimate (around € 2.3 Bn) due to higher operating cash generation (€ +370 M adjusted for factoring, which rose by around € 100 M in the 1H), where working capital remained quite neutral on the quarter. Another reason behind the improvement of our net debt estimate is the payment of around € 400 M for the acquisition of the last stake in the SH-288 that was not included in the 2Q.
The backlog stands at € 72.48 Bn, meaning +7% growth vs. YE’22 (adjusted for FX), thanks to order intake being +25% in 1H’23 than in 1H’22.
During the conference call the company spoke of the new agreement with Mundys regarding Abertis, clarifying that: (i) now ACS and Mundys each have 50% of the company’s shares (previously Mundys had one share more), (ii) the company aims to maintain the current dividend policy (€ 600 M in 2023 and 2024) into the future, as long as it is compatible with maintaining an investment grade rating in Abertis and (iii) it cannot yet disclose the valuation at which the transfer of 56% of the SH-288 will be carried out, although it has clarified that it is above the acquisition price. Likewise, they mention that they are committed to injecting capital equally into Abertis if needed in order to undertake the new acquisitions (there are currently three bids on three assets) presented and maintain an investment grade rating.
Despite the fact that the results were already largely known (due to Hochtief and Abertis already having released their earnings), the fact that the rest of the divisions have also performed well and that cash generation has been better than expected could translate into at least a moderately positive reception by the market. The stock has outperformed the IBEX by +5% YtD. BUY. Target Price: € 35.10/sh. (upside 10.24%).