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EUSKALTEL: 1H’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results
Sales: € 171.6 M (+0.3% vs. -0.3% expected);
EBITDA: € 87.5 M (+3.7% vs. +3.1% expected);
Net Profit: € 16.4 M (€ 17.8 M expected);
1H'20 vs. 1H'19 Results
Sales: € 343.4 M (+0.2% vs. -0.1% expected);
EBITDA: € 175.2 M (+5.9% vs. +5.6% expected);
Net Profit: € 35.5 M (+55%);
Good results and in line, with very limited impact from Covid-19. We stress the positive performance of the client base with 11,300 net adds (+1.4%, with 6,500 stemming from Virgin), leaving the 2Q’20 mass market sales -0.5% lower (vs. -0.6% BS(e)) and total sales at € 171.6 M (+0.3% vs. 2Q'19) thanks to B2B revenues, which grew +4.4% (vs. -1.5% BS(e)). The 2Q’20 EBITDA came in at € 87.5 M (+3.7%), with a 51% margin (vs. 49.4% in the 2Q’19) thanks to the continued cost efficiencies that enable to absorb the commercial launch of Virgin (excluding this impact, EBITDA would have reached € 91.8 M, +8.7% thanks to the -17.5% drop in OPEX ex Virgin).
We expect a positive impact thanks to the better performance of the client base and the good evolution in profitability (in line with expectations), without a doubt, a distinctive factor of robustness in view of the impact from Covid-19 vs. other sectors and harder hit companies. However, we maintain caution, as the valuation upside is not sufficiently appealing to offset the risks (execution of expansion and tougher competition), and we do not see consolidation in the short-term. SELL. Target Price: € 8.50/sh (upside 8.28%)