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FCC: 1Q’20 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

Has released 1Q'20 vs 1Q'19 Results
Sales: € 1.485 Bn (+3.3% vs. +3.5% BS(e));
EBITDA: € 218.5 M (+5.1% vs. +9.5% BS(e));
EBIT: € 94.5 M (-4.4% vs. +4.7% BS(e));
Net Profit: € 28.1 M (-61.2% vs. -59.8% BS(e));

The 1Q’20 results came in below expectations on the operating level incl. the provisions made for Covid-19 and above excl. them. EBITDA on the quarter increased less than expected (+5.1% vs. +9.5% BS(e) despite sales being in line (+3.3% vs. +3.5% BS(e9) due to a € 20 M provision (~2% of EBITDA’20e) for Covid-19 (with no impact on cash). Excluding this effect, EBITDA would have come in +5% above our estimate. We stress the impact in March’20 standalone on the Construction and Cement divisions’ EBITDA (3% of EV) of around -25% on average and -38% in Concessions (11% of EV) vs. the resilience shown by Services and Water (80% of EV), with increases of +16% in EBITDA. Net Profit grew in line with expectations (-61.2% vs. -59.8% BS(e)) thanks to better performance in financial costs and taxes (effective rate of 25% vs. ~30% BS(e)).
There were no surprises from net debt, which increased by +3.9% to € 3.71 Bn (3.6x NFD/EBITDA), in line with our estimates (€~3.65 Bn).
The stock is currently up +2.3% (+2.2% vs. IBEX), which we chalk up to the apparent resilience of its Services and Water divisions to the impact from Covid-19. With the revision of estimates we plan to make, in a scenario of V-shaped recovery (-13% in EBITDA’20e) we would cut our T.P. by less than -7%, bringing it to € 13/sh. (+59% upside), and in a negative scenario of U-shaped recovery (-20% in EBITDA’20e and -14% on average in 2020-21) our T.P. would stand at € 12.10/sh. (+48% upside), and thus we maintain our BUY recommendation. Since Feb’20 highs, FCC has fallen -32% (in line with the IBEX), and we think it has the business model to do better. We place our T.P. Under Revision.