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CIE AUTOMOTIVE: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q’20 vs. 2Q’19 Results:
Sales: € 386.2 M (-56.6% vs. -60.2% BS(e) and -59.7% consensus);
EBITDA: € 13.2 M (-91.6% vs. € -10.8 M BS(e) and € -1.0 M consensus);
EBIT: € -14.1 M (€ 113.7 M in 1H’19 vs. € -38.8 M BS(e) and € -28.0 M consensus);
Net Profit: € -14.3 M (€ 77.5 M in 1H’19 vs. € -34.5 M BS(e) and € -27.0 M consensus).
1H’20 vs. 1H’19 Results:
Sales: € 1.208 Bn (-29.0% vs. -30.9% BS(e) and -30.6% consensus);
EBITDA: € 153.5 M (-50.2% vs. -58.0% BS(e) and -54.8% consensus);
EBIT: € 90.2 M (-60.2% vs. -71.1% BS(e) and -66.3% consensus);
Net Profit: € 58.3 M (-61.2% vs. -74.6% BS(e) and -69.6% consensus).

The 2Q’20 results beat expectations on all lines (around +19% vs. BS(e) and +10% vs. consensus in 1H’20 EBITDA) and in NFD (€ 1.78 Bn vs. € 1.84 Bn BS(e) and € 1.83 Bn consensus). The company expects a better 2H’20 in sales and in EBITDA that will allow it to maintain the dividend payout, share buyback and debt reduction.
Sales have performed better, although they fell -29% vs. 1H’19 (-31% BS(e) and consensus). On this occasion (as in 1Q’20) CIE does not report organic and inorganic growth separately, only providing the figure for the overall drop on the market (-40% on the markets in which it is present), although obviously inorganic growth has played an important role. Based on our inorganic growth estimates (+13% vs. 1H’19), organic growth would have come in at -41%, very much in line with its market. The EBITDA margin stands at 13%, above expectations (11% BS(e) and 12% consensus), falling -540bps vs. 1H’19 and -330bps vs. the company’s pro forma 2019 figure including all the acquisitions made over the year (16%). Thus, EBITDA fell -50% vs. 1H’19 (-58% BS(e) and -55% consensus) to € 154 M vs. our annual estimate of 14.4% for the EBITDA margin and € 411 M of EBITDA.
Net debt came in at € 1.78 Bn (3.9x NFD/EBITDA) vs. € 1.52 Bn in Dec’19, affected by the acquisitions made over the period, and better than expected (€ 1.84 Bn BS(e) and € 1.83 Bn consensus) due to better working capital performance than expected (€ -87 M vs. € -150 M BS(e)), even against a backdrop of reduced factoring. In this regard, CIE has announced that it has € 1.13 Bn of liquidity reserves (€ 890 M as of 1Q’20) vs. €~570 M of maturities over the next 12 months. Likewise, the company has announced that it has an 18-month waiver on its financial covenants (no details given on where these covenants stood) until 06/21.
In short, CIE has beaten expectations, and we expect the positive market reaction to continue, despite outperforming the IBEX by +7% since 19/02 (pre-Covid index high) and +40% since March lows. There is a conference call that started at 15:30 (CET). BUY. T.P. € 20.97/sh. (upside +32.64%).