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CAF: FY2020 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'20 vs. 4Q'19 Results
Sales: € 945.0 M (+28.6% vs. +6.9% BS(e) and +9.8% consensus);
EBITDA: € 63.0 M (-13.7% vs. -4.1% BS(e) and -2.7% consensus);
EBIT: € 50.0 M (-3.8% vs. -8.7% BS(e) and -5.8% consensus);
Net Profit: € 31.0 M (+29.2% vs. -22.5% BS(e) and +20.8% consensus);
FY2020 vs. FY2019 Results
Sales: € 2.762 Bn (+6.3% vs. +0.2% BS(e) and +1.0% consensus);
EBITDA: € 201.0 M (-17.6% vs. -14.8% BS(e) and -14.3% consensus);
EBIT: € 121.0 M (-25.8% vs. -27.3% BS(e) and -26.4% consensus);
Net Profit: € 10.0 M (-84.1% vs. € -2.4 M BS(e) and -87.3% consensus);

The company released at yesterday’s closing bell FY2020 results showing the impact from Covid-19. Although they came in above expectations in sales (+6% vs. BS(e) and +5% consensus), they were slightly below in EBITDA (-3% vs. BS(e) and -4% consensus), and far better in NFD (€ 311 M vs. € 391 M BS(e) and € 452 M consensus; although adjusted for factoring, the difference would decrease by € 28 M) on a better working capital performance and more substantial financial payments received than expected.
Sales increased by +6% vs. FY2019, as a result of a better performance by the rail business (74% of CAF’s sales), +8% above our estimate, and Solaris (26% of CAF’s sales), which performed in line with our expectations. As for the rail business, the manufacturing activity not linked to maintenance services (55% of CAF’s sales) grew +2%, whereas services activities (19% of CAF’s sales) increased by +14% vs. FY2019 thanks to the integration of Euromaint, and despite the fact that maintenance services would still stand below pre Covid-19 levels. Currently, the maintenance services business has 67% of its contracts with traffic levels 90% above normal activity and 88% of its contracts with traffic levels 70% above normal activity, which means a slight improvement vs. July’20 (60% and 84%, respectively).
The adjusted EBITDA margin came in at 7.3%, below expectations (8.0% BS(e) and consensus; 9.4% in 2019), which translated into € 201 M of EBITDA (-18% vs. 2019). Solaris had a margin of 9.2% (vs. 8.3% BS(e) due to a larger weight for e-Mobility in the mix and the positive FX impact) and the rolling stock business 6.6% (vs. 7.2% BS(e)). In the conference call the company mentioned that rolling stock margins are still affected by the lower maintenance activity, by provisions made out of caution for delays in some deliveries and by negative impacts from legacy projects (not specified). Likewise, the company mentions that for 2021 it believes it will be feasible to reach pre-Covid margins on the consolidated level. Adjusted Net Profit beat expectations (€ 10 M vs. € -2.4 M BS(e) and € 8 M consensus), due especially to the positive impact from the sale of an irrelevant business.
In cash generation, the results were clearly better than expected, with NFD reaching € 311 M (1.5x NFD/EBITDA according to CAF’s definition; vs. € 391 M BS(e) and € 452 M consensus) thanks to the better working capital performance and to having received higher financial payments (concessions) than expected. Nevertheless, adjusted for factoring, the difference would fall by € -28 M (increase in factoring). Additionally, the company raised its liquidity position to € 1.12 Bn (vs. € 914 M as of YE2019).
Order intake came in above our expectations (€ 2.123 Bn vs € 1.4 Bn BS(e); 0.8 BtB; excluding the contract awarded and subject to be signed with Alstom in Paris), leaving the backlog at € 8.81 Bn (3.2x sales). The company was optimistic at the conference call on possible awards in the short-term (2021) and going forward.
The group unveiled its Guidance’21: (i) BtB of at least 1 (BtB 1 BS(e)), estimating it could be reached even without the contribution from the Paris contract (awarded although the signing is not clear); (ii) increasing sales vs. FY2020 (+1% BS(e) +5% consensus); and (iii) Net Profit growth, with pre Covid-19 operating margins (9.4% in FY2019 vs. 9.5% BS(e) and 8.9% consensus). Additionally, at the conference call it stated that 2021 will be a more demanding year in working capital given the contract execution calendar although in any case it does not believe that NFD will vary significantly vs. 2020 depending on the upfront payments obtained as a result of the new awards.
In short, despite the slightly disappointing EBITDA figures, the results came in far above expectations in debt and the company has provided a reasonable guidance’21. Thus, we would expect a mildly positive share price reaction, especially when the stock has underperformed the IBEX by -12% thus far this year. BUY. T.P. € 41.00/sh. (upside +13.42%).