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CAF: 9M’19 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results
Sales: € 597.0 M (+39.2% vs. +40.1% BS(e) and +39.9% consensus);
EBITDA: € 55.0 M (+12.2% vs. +11.6% BS(e) and +18.4% consensus);
EBIT: € 34.0 M (-10.5% vs. -12.1% BS(e) and 0.0% consensus);
Net Profit: € 14.0 M (+7.7% vs. -7.7% BS(e) and +7.7% consensus);
9M'19 vs. 9m'18 Results
Sales: € 1.863 Bn (+35.8% vs. +36.1% BS(e) and +36.0% consensus);
EBITDA: € 171.0 M (+25.7% vs. +25.5% BS(e) and +27.9% consensus);
EBIT: € 111.0 M (+5.7% vs. +5.1% BS(e) and +9.5% consensus);
Net Profit: € 39.0 M (+25.8% vs. +19.4% BS(e) and +25.8% consensus);

The company’s 9M’19 Results (released at yesterday’s closing bell) were in line with our estimates (slightly above in adjusted Net Profit) although below the consensus in EBITDA (-1.9%; -5.7% on the quarter).
Thus, sales grew +36% vs. 9M’18, as expected, meaning that the rail business (excl. Euromaint) grew somewhat below our estimate (+4.5% vs. +5.9% BS(e); +0.4% on the quarter vs. +5% BS(e)), which was offset with growth above our estimate in Solaris (+3.5%; +9.3% on the quarter). In the subsequent conference call, the company mentioned that in the 4Q we could see similar growth rates in the rail division (excl. Euromaint) and in line or somewhat higher (in absolute terms) in Solaris.
The adjusted EBITDA margin came in slightly above our estimate (9.2% vs. 9.1% BS(e) in cumulative terms and on the quarter; in line with our estimate for the full year), although somewhat below the consensus (9.3% in cumulative terms and 9.7% on the quarter). Given that the company did not provide broken down data for margins, we cannot draw any conclusions by business. In any case, the company claims that Solaris’ margins would have improved in 3Q, which according to our estimates, leaves the rail division’s margins (excl. Euromaint) in line with (or slightly above) last quarter’s, still affected by the problematic contract in the US. Moreover, the company also mentioned that it expects Solaris’ margins to increase in 4Q, and do not rule out the possibility that this growth may be double-digit (vs. 4.8% in 2Q’19 and 6% BS(e) in FY2019).
Adjusted Net Profit came in above our estimate (+30% vs. 9M’18; +23% BS(e)) and in line with the consensus (+29%). As usual in the 9M results, the company does not release information on cash flows and debt.
As for the backlog, it currently totals € 9.11 Bn (vs. € 7.72 Bn as of YE2018) thanks to € 3.0 Bn of awarded contracts (vs. € 2.91 Bn in all of 2018), which does not include contracts pending signing or signed for an amount above € 800 M. Awarded contracts (including those pending signing) are currently +45% above our initial estimate for the full year (which is in line with our recurring estimate), although we do not yet consider extrapolating this solid performance into the future, and thus the impact on the valuation would be limited.
In short, these results are very much in line with our estimates but below the consensus in margins (especially on a standalone basis this quarter), and thus we would not rule out a slightly cool reception by the market, especially considering the +2% outperformance vs. the IBEX over the past month (+3.5% on the year). BUY. T.P. € 47.89/sh. (upside +15.81%).