EUR 100.00 For Business Accounts Only

CIE AUTOMOTIVE: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results:
Sales: € 852.2 M (+15.6% vs. +16.5% BS(e) and +18.3% consensus);
EBITDA: € 136.9 M (+9.7% vs. +11.9% BS(e) and +11.8% consensus);
EBIT: € 94.88 M (+2.2% vs. -0.2% BS(e) and +4.3% consensus);
Net Profit: € 63.3 M (+19.2% vs. -4.1% BS(e) and +1.3% consensus).
FY2019 vs. FY2018 Results:
Sales: € 3.461 Bn (+14.2% vs. +14.5% BS(e) and +14.9% consensus);
EBITDA: € 594.4 M (+12.4% vs. +12.9% BS(e) and +12.9% consensus);
EBIT: € 427.08 M (+16.9% vs. +16.3% BS(e) and +17.4% consensus);
Net Profit: € 287.5 M (+18.4% vs. +13.3% BS(e) and +14.5% consensus).

The FY2019 results came in very much in line with estimates (around -0.5% vs. BS(e) and consensus in EBITDA) in the P&L statement, although better in cash generation.
Organic growth on the year would have come in somewhat below what we were expecting vs. 2018 (-4.0% vs. -2.0% BS(e)), offset by a lager contribution than expected from the companies acquired in 2019 (+16.6% vs. +15.1% BS(e)). Thus, sales grew +14.2% on the year (vs. +14.5% BS(e) and +14.9% consensus; +1.6% due to FX) to € 3.46 Bn. The EBITDA margin came in at 17.2%, in line with expectations, and hit by the acquisitions made. EBITDA grew +12.3% vs. 2018 (+12.8% BS(e) and consensus) to € 594 M.
Net debt totaled € 1.51 Bn (2.3x NFD/adjusted EBITDA) vs. € 948 M in Dec’18, affected by the acquisition made over the period, improving upon our estimate and the consensus (€ 1.6 Bn BS(e) and € 1.59 Bn consensus), thanks to better working capital performance than expected.
As for the impact from the coronavirus, the Company estimates that at present it will not have a significant impact on growth and the improvement to profitability that CIE has shown over the past few quarters and which will continue in 1Q’20, in which it expects to exceed 1Q’19 sales. Although we welcome the company’s message on coronavirus, we downplay the comment on sales, as in order for 1Q’20 sales to come in below 1Q’19 the drop in organic sales would also have to be more than -20% for them not to be offset by the inorganic growth from the companies acquired in 2019.
Separately, the Company has announced the launch of a share buyback programme of up to 5% of the capital or € 160 M (~7% of market cap) over a maximum of 2 years. The aim of the programme is to cancel the shares acquired. The programme would be accretive in terms of EPS (+2.7% BS(e)), and assuming that the buyback is carried out at the current share price, it would mean raising our T.P. by +1.8%. Considering that CIE could acquire up to a maximum of 25% of the daily trading volume, this programme could be finalised in 116 sessions if CIE is at full speed, or it could take until maturity, in which case it would purchase ~6% of daily trading volume.
Lastly, CIE reiterated (as it did in 9M’19) that it has met its Strategic targets for 2020 (growth in sales’16-20 of ~4x the market; EBITDA margin above 18% and ~1x NFD/EBITDA, among others) one year early. Note that on 31 March it will hold its Capital Markets Day, when it will present the Strategic Plan for the coming years.
In short, we expect a positive reaction by the market, especially after underperforming the IBEX by -12% so far this year (through yesterday). Today the stock is rising +8% vs. the IBEX. BUY. T.P. € 26.85/sh. (upside +54.49%).