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APPLUS: FY2020 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'20 vs. 4Q'19 Results
Sales: € 410.2 M (-8.4% vs. -4.3% BS(e) and -5.4% consensus);
EBIT: € 43.0 M (-11.5% vs. -7.4% BS(e) and -10.3% consensus);
FY2020 vs. FY2019 Results
Sales: € 1.558 Bn (-12.4% vs. -11.3% BS(e) and -11.6% consensus);
EBIT: € 118.4 M (-39.9% vs. -38.9% BS(e) and -39.6% consensus);

The results came in below expectations in sales (smaller contribution from E&I), in line in EBIT and above in cash generation (€ 226.2 M of FCF’20, +20.7%). 4Q’20 sales fell by -8.5% (-7.9% organic, improving vs. 2Q’20, when sales dropped by -29.3%, and vs. 3Q’20, when they fell by -8.2%), which, despite improving vs. the previous quarters, stands below our estimates due to worse performance by E&I (which fell by -18.3% in 4Q’20 vs. -11% BS(e), as it still shows the impact from Covid-19 and project cancellations and delays, as well as the falling demand for crude oil). The rest of divisions performed in line with our estimates, with Idiada falling by -17.8%, and Autos and Labs growing by +20.1% (+14.8% organic) and +17.5% (-4.1% organic), respectively.
4Q’20 EBIT decreased by -11.6% (-7.2% organic) to € 43 M, with the margin coming in at 10.5% (vs. 10.1% in 3Q’20 and 10% BS(e)). FCF totalled € 226.2 M (+20.7%), bringing the NFD to € 741.4 M (3.0x NFD/EBITDA and 3.1x incl. IFRS16). As for the guidance’21, the company forecasts double-digit growth in sales at constant exchange rates (vs. 7% BS(e) and +9% consensus), although most of this growth would come from the inorganic contribution from recent acquisitions) and an adjusted operating margin of ~10% (vs. 8.9% BS(e) and 10% consensus). The company has proposed a DPS’20 of € 0.15/sh. (1.7% yield), which stands above our estimates (€ 0.07/sh.) and those of the consensus (€ 0.09/sh.).
Despite the greater sales weakness, we focus on the sequential improvement and the gradual business recovery. We will raise our estimates to include the latest acquisitions. Despite the strong rally from March’20 lows (+113% in absolute terms), the share price would be lagging behind in 2021 -1.3%, which along with the better crude oil prospects could lead it to resume the rally. We reiterate BUY, T.P. € 9.80/sh. (+8.89% upside).