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ENDESA: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
EBITDA: € 943.0 M (+12.8% vs. +7.9% BS(e) and -2.0% consensus);
FY2019 vs. FY2018 Results
EBITDA: € 3.841 Bn (+5.9% vs. +4.8% BS(e) and +2.5% consensus);
Net Profit: € 1.562 Bn (+10.2% vs. +11.7% BS(e) and +8.8% consensus);

The results came in above expectations in EBITDA but in line in adjusted Net Profit (€ 1.56 Bn vs. € 1.58 Bn BS(e) vs. € 1.54 consensus, which compare with € 171 M of Net Profit, -88%). ELE has made a provision of € 404 M for impairments in generation assets from non-peninsular territories after adapting them on the accounting level to the new remuneration formula for 2020-2025. The company reiterates that this provision will not have an impact on the dividend, confirming its DPS proposal’19 of € 1.475/sh. (+3.3%/in line with expectations/5.8% yield). This provision comes after those made in 3Q’19: impairments in coal-fired plants totalling € 728 M (with no impact on cash) and another € 500 M from decommissioning (which will entail cash outflows in the future), which ELE insisted would have no impact on the dividend.
Once again, the reason behind the positive EBITDA numbers is the good performance of the liberalised business (33% of EBITDA), which grew +22% in EBITDA, whereas the rest of the divisions are growing by lower rates, as is the case with distribution (27% of EBITDA/+2% growth), or falling, such as the extra peninsular business (10% EBITDA/-25% drop).
ELE ended FY2019 with € 6.377 Bn of NFD (1.6x EBITDA), -12% vs. 9M’19, partially expected and explained by the positive performance of the regulatory working capital (€ 894 M vs. € 1.168 Bn as of 9M’19).
Lastly, ELE reiterated the 2020 targets announced in November: € 3.9 Bn EBITDA and € 1.7 Bn Net Profit, +2.5% and +3.9% above our expectations (+2.3%/+4.2% vs. consensus).
The company will hold a conference call at 10:00(CET). Despite the positive surprise in EBITDA, we cannot extrapolate it going forward, and thus we foresee a neutral reception. SELL, T.P. € 24.15/sh. (-3.71% potential).