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

1Q'20 vs. 1Q'19 Results
Sales: € 9.553 Bn (+3.1% vs. +1.1% expected and -0.9% expected by the market consensus);
EBITDA: € 751.0 M (-8.3% vs. -12.8% expected and -8.9% expected by the market consensus);
EBIT: € 491.0 M (-2.0% vs. -11.6% expected and -5.8% expected by the market consensus);
Net Profit: € 201.0 M (-28.7% vs. -51.4% expected and -18.8% expected by the market consensus).
Has released its 1Q’20 Results that with the exception of Abertis (already made public; 13% T.P.) and Services (expected; 2% T.P.) do not underscore a significant impact from Covid-19, coming in slightly above expectations. Thus, sales exceed our estimate by +2% (+4% vs. consensus) and EBITDA +5% (+1% vs. consensus), with a -8.3% drop, mainly explained by the lower contribution expected from Abertis (€ 3 M vs. € 54 M in 1Q’19). Excluding this effect, the fall would have been -2.3% and the EBITDA margin (ex Abertis) would have only decreased by -43bps (less than expected; -65bps BS(e)) vs. 1Q’19 due to the impact from Services (3% EBITDA’19) and some decline in margins (-70bps, as expected) in Dragados (9% EBITDA’19). Net Profit came in at € 201 M (-28% vs. 1Q’19), hit by € -30 M on valuation financial instruments; +42% above our estimate (-12% below that of the consensus), which would be explained by the higher-than-expected EBITDA, lower depreciations and lower financial result than expected.
Free cash flow was hit by payments associated with BICC (€ -800 M already known) and working capital adjusted for factoring (that decreases by around € 200 M) that means ~ € -1 Bn of cash outflow, that was expected given the business seasonality (around € -1.1 Bn in 1Q’19), and thus, for the time being, we do not see a negative impact from Covid-19. With this in mind, NFD (ex IFRS16 and factory) came in at € 2.374 Bn (€ 897 M in 1Q’19/ NFD/EBITDA 0.8x /1.75x including IFRS 16 and factory) impacted also by € +600 M on financial investments (in energy and PPPs mainly), share buyback and dividends.
The order backlog decreases by -2.9% (+1.2% adjusted for FX), with order intake totalling € 7.59 Bn, meaning 0.8x BtB, in our view, impacted by possible delays in awards as a result of Covid-19 (expected). In any event, the company shows a € 230 Bn pipeline in PPs and 6Gw in energy projects.
In our view, until today, the results show the resilience of ACS’s business, which has not been highly impacted by the Covid-19 crisis (with the exception of Abertis and Services). As the results have been slightly above expectations, the market reaction should be neutral or slightly positive. The company has outperformed by IBEX by +11% since February’s highs (prior to the impact from Covid-19 on stock markets) and by +90% since the rally from March’s lows (it even ended at € 11.45/sh.), which could explain its -3% correction vs. IBEX at today’s session.
Based on our scenario of V-shaped recovery (two quarters of deep recession followed by moderate recovery in the third quarter, strong recovery in the fourth and very strong recovery in the next year), we foresee a -50% drop in Net Profit’20e vs. 2019 and -7% on average in 2021/22, meaning a -5% CAGR’19-22e, and not reaching a similar level to 2019 until 2024. Against this backdrop, we set our T.P. at € 29.19/sh. (-27% vs. previous T.P.; € 25.80/sh. in the U-shaped scenario of economic recovery) meaning 5.7x EV/EBITDA (3.8x ex factoring and with minorities at BV vs. 5.7x historical average) and 11.0x P/E’21e (vs. 11.8x historical average). BUY. Target Price: € 29.19/sh (upside 24.96%)