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CIE AUTOMOTIVE: 9M’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results:
Sales: € 791.8 M (-12.7% vs. -12.8% BS(e) and -12.3% consensus);
EBITDA: € 130.6 M (-12.6% vs. -20.0% BS(e) and -20.4% consensus);
EBIT: € 88.9 M (-15.8% vs. -24.6% BS(e) and -25.2% consensus);
Net Profit: € 59.5 M (-19.7% vs. -28.4% BS(e) and -31.2% consensus).
9M'20 vs. 9M'19 Results:
Sales: € 2.0 Bn (-23.3% vs. -23.4% BS(e) and -23.2% consensus);
EBITDA: € 284.1 M (-37.9% vs. -40.3% BS(e) and -40.4% consensus);
EBIT: € 179.1 M (-46.1% vs. -48.9% BS(e) and -49.1% consensus);
Net Profit: € 117.8 M (-47.5% vs. -50.3% BS(e) and -51.3% consensus).

The 9M’20 results were better than expected on the EBITDA level (around +4% BS(e) and consensus) and in line in NFD (€ 1.777 Bn vs. € 1.783 Bn BS(e) and € 1.772 Bn consensus). The company expects profitability to remain at pre-Covid levels in 4Q’20 (already reached in 3Q’20), which will allow it to continue with its shareholder remuneration strategy (we understand it will keep the payout at 33%, 2.3% yield’20e).
Sales were in line with expectations, falling -23% vs. 9M’19 (-23% BS(e) and consensus; -13% in 3Q’20)). As has been the case in the last few results releases, CIE does not report separate organic and inorganic growth rates, only providing the figure of the drop in the global market (-29% in the company’s markets), although obviously inorganic growth has played an important role. If we take our inorganic growth estimates as a reference (+9% vs. 9M’19 BS(e)), organic growth would have fallen -30%, very much in line with the market. The EBITDA margin hit 14.2%, above expectations (13.7% BS(e) and 13.6% consensus), falling -330bps vs. 9M’19 and -180bps vs. the company’s pro forma’19 figure including acquisitions for the whole year (16%). We should point out that the margin on the quarter (16.5%) would already stand at pre-Covid levels (16.5% in 3Q’19). Thus, EBITDA fell -38% vs. 9M’19 (-40% BS(e) and consensus) to € 284 M vs. our annual estimate of 14.4% margin and € 411 M of EBITDA. In general, all the different regions grew in line with our estimate (except NAFTA, which was slightly below our estimate, but offset by Asia, which was slightly above), with margins beating expectations.
Net debt stood at € 1.777 Bn (4.1x NFD/EBITDA) vs. € 1.522 Bn in Dec’19, affected by the acquisitions made over the period, and in line with expectations (€ 1.783 Bn BS(e) and € 1.772 Bn consensus). In this regard, CIE has announced that it has € 1.22 Bn of liquidity reserves (€ 1.13 Bn as of 1H’20). The company has reiterated the 18-month waiver on financial covenants (although without specifying where they were currently) until 06/21.
In short, despite the fact that CIE has beaten expectations on the EBITDA levels and come in line in debt , after outperforming the IBEX by +19% cumulatively since 19/02 (index high prior to the impact from Covid-19) and +62% since March lows, we would expect a neutral, or slightly positive reception at best. The stock is currently falling more than -2.5% (-1% IBEX). There will be a conference call at 15:30 (CET). BUY. T.P. € 20.97/sh. (upside +20.03%).