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APPLUS: 1Q’20 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results
Sales: € 416.9 M (+0.4% vs. -0.9% BS(e));
EBIT: € 27.7 M (-27.9% vs. -21.9% BS(e)).

The results were slightly better in sales and worse in EBIT, affected by the impact from Covid-19 since mid-March, with the vehicle inspection business (41% EBIT) hit especially hard. The 1Q’20 sales grew +0.3% (-0.3% organic), where the company highlights the solid performance through February (with +3.4% organic growth), but with a negative impact in March from Covid-19 (-7.2%) after the sudden closing of many facilities used by the group, as well as a drastic reduction to activity in others. The low capacity to cut costs due to how sudden the impact was means that 1Q’20 EBIT fell -27.9% (vs. -21.9% BS(e)) to € 27.7 M (-73.5% drop in March vs. +4.3% growth through February). Cash generation in 1Q’20 came in at € 29.6 M (-37%) due to higher working capital consumption (€ 25.5 M) and the drop in EBITDA, leaving NFD/EBITDA at 2.0x and NFD of € 626.6 M.
As for the impact from Covid-19, the company foresees a -35% drop in sales in the 2Q’20 and slightly negative EBIT (where the impact from MOT activities and from the Oil&Gas sector is included) and the beginning of the recovery in the 2H’20 and significant as the new MOT stations will be reopened and the inspections delayed will be recovered. We will cut our estimates and T.P. (from € 14.60/sh. to Under Revision) to include this impact and even though the shot-term visibility will remain low (at today’s conference call at 10:00 (CET) we expect further details on the recovery pace of its business, as the company outlined it will be gradual in MOT activities and from mid March), we maintain our BUY recommendation as we see value in the long-term.