FCC: 4Q’19 RESULTS AND T.P. UPGRADE (ANÃLISIS BANCO SABADELL)
4Q'19 vs. 4Q'18 Results:Sales: € 1.698 Bn (+3.6% vs. +4.3% BS(e));
EBITDA: € 285.0 M (+32.3% vs. +24.3% BS(e));
Net Profit: € 33.7 M (-55.4% vs. -16.0% BS(e));
FY2019 vs. FY2018 Results:
Sales: € 6.276 Bn (+4.8% vs. +4.9% BS(e));
EBITDA: € 1.026 Bn (+19.1% vs. +17.1% BS(e));
Net Profit: € 266.7 M (+6.0% vs. +17.9% BS(e));
The 4Q’19 results were in line on the operating level and below expectations in Net Profit. EBITDA on the quarter grew more than expected (+32% vs. +24% BS(e)) despite slightly lower sales (+3.6% vs. +4.3% BS(e)), due to better performance in margins, which reached 16.8% on the quarter (vs. 15.7% BS(e)), where we highlight the Services (~44% of sales; 17.8% vs. 16.5% BS(e)) and Water divisions (18% sales; 24.4% vs. 22.5% BS(e)). Net Profit, however, came in below expectations (-55.4% vs. -16.0% BS(e)) as a result of a goodwill impairment in Cement totaling € 70 M on the quarter (no impact on cash). Without this effect, Net Profit would have come in +27% above expectations.
Net debt ended at € 3.58 Bn (3.5x NFD/EBITDA; +19% vs. 3Q’19), very much in line with our estimates (€ 3.55 Bn), and including the main effects from the quarter: the consolidation of Cedinsa’s net debt for € 788 M (added to the scope of consolidation in Nov’19) and a recovery of € 86 M of working capital in 2H’19.
In short, the 4Q’19 results beat expectations on the operating level and came in below in Net profit due to one-offs, marked by the strong cash performance against a backdrop of significant investments in growth that explain the positive reception (+1.8% vs. IBEX).
Following these 4Q’19 results we roll our model over and raise our 2020-23 estimates by +13% on average in EBITDA and +11% in Net Profit in order to reflect the consolidation of Cedinsa (concession of 4 motorways in Catalonia) in 4Q’19, with no impact on the T.P., as the concession was already included in our valuation. With all this in mind, we raise our T.P. +4% to € 14.00/sh. due to the roll over effect (+39.7% upside) and maintain our BUY recommendation. We continue to see FCC as an appealing company, with a more defensive profile than other stocks in the sector (Services, Water and Motorways are >90% of EV), and where there is still an opportunity to bet on the company thanks to the growth in its most profitable divisions.
Fauji Cement is engaged in the manufacturing and marketing of cement.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
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