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CAF: 9M’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs 3Q'19 Results
Sales: € 700.0 M (+17.3% vs. +16.6% BS(e) and +13.6% consensus);
EBITDA: € 65.0 M (+18.2% vs. +6.4% BS(e) and +7.3% consensus);
EBIT: € 43.0 M (+26.5% vs. +5.9% BS(e) and +8.8% consensus);
Net Profit: € 14.0 M (0.0% vs. -20.7% BS(e) and +28.6% consensus).
9M'20 vs 9M'19 Results
Sales: € 1.817 Bn (-2.5% vs. -2.7% BS(e) and -3.7% consensus);
EBITDA: € 138.0 M (-19.3% vs. -23.1% BS(e) and -22.8% consensus);
EBIT: € 71.0 M (-36.0% vs. -42.3% BS(e) and -41.4% consensus);
Net Profit: € -21.0 M (€ 39.0 M in 9M'19 vs. € -23.9 M BS(e) and € -17.0 M consensus).

At yesterday’s closing bell, the company released its 9M’20 results, which showed an impact from Covid-19 and came in above expectations in EBITDA (+5% vs. BS(e) and consensus). We recall that the company does not provide balance sheet or cash flows data in 3Q.
Sales fell by -2.5% vs. 9M’19 (in line with our estimate and +1% vs. the consensus), as a result of the performances of Solaris performance (25% of CAF’s sales), in line with our estimate (+6.4% vs. 9M’19) and the rail business (-5% vs. 9M’19). However, we highlight Solaris’ good performance, whose turnover increased by +39% vs. last quarter. Manufacturing activity is developing normally (the company expects to recover lost hours due to Covid-19 before the year ends), while maintenance activity continues to recover, although it is not at 100% yet.
The adjusted EBITDA margin came in at 7.6%, above expectations (7.3% BS(e) and 7.4% consensus; 9.2% as of 9M’19), which meant € 138 M of EBITDA (-19% vs. 9M’19). The company does not provide a breakdown of margins in 3Q. Adjusted Net Profit came in at €-21 M (vs. € 38 M in 9M’19 and vs. €-24 M BS(e) and €-17 M consensus), negatively affected by FX (mainly the BRL) and a high fiscal impact that, according to the company, could return to more normalised levels towards the end of the year.
Awarded contracts reached €~1.1 Bn (including the Renfe contract pending signature), clearly below previous years (€ 4.07 Bn in 2019 and € 2.9 Bn in 2018), although this was expected. As a result, the backlog has fallen to € 8.71 Bn (vs. € 9.45 Bn in 2019; 3.3x sales). During the conference call the company mentioned that it has a pipeline of current offers that is even higher than the usual range of € 5-7 Bn, and this amount could even be raised in the future due to the positive impact from EU recovery funds and the targets included in the European CO2 emission reduction plans. Of this pipeline, the company would highlight the well-known contracts with Renfe pending awarding and several pending tenders in France (some of them large sized).
Lastly, the company confirmed the guidance of ending the year with a similar or even higher sales level (following the positive recent performance by Solaris) than 2019 (vs. -1.6% BS(e) and in line with the consensus), with 4Q’20 margins that should remain at normal levels closer to those of 3Q’20. This would mean an EBITDA’20 figure +4% above our estimate (+5% vs. consensus; assuming the same sales level as in 2019).
In short, since results came in above expectations in EBITDA and the company reiterated (and even raised slightly) its guidance’20, we would expect a positive share price reaction, especially considering that the stock has underperformed the IBEX by -2% since February’s pre Covid-19 highs. BUY. T.P. € 41.00/sh. (upside +27.33%).