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FLUIDRA: 9M’20 RESULTS AND T.P. UPGRADE (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
Sales: € 371.6 M (+20.1% vs. +19.9% expected and +11.3% expected by the market consensus);
EBITDA: € 78.6 M (+64.1% vs. +48.2% expected and +41.1% expected by the market consensus).
9M'20 vs. 9M'19 Results
Sales: € 1.143 Bn (+7.5% vs. +7.5% expected and +5.0% expected by the market consensus);
EBITDA: € 248.0 M (+30.2% vs. +26.2% expected and +24.4% expected by the market consensus).

The company has released good 3Q’20 Results, above our expectations and those of the consensus (€ 79 M 3Q’20EBITDA vs. € 71 BS(e) and 68 consensus) but partially priced in if we take into account the good share price performance (+47% vs. IBEX since the stock market highs on Feb’20 prior to Covid-19). Even though at the 1H’20 Results conference call the company outlined it was growing at +15% (3Q’20 vs. 3Q’19), it has finally grown by +20%, mainly fuelled by Southern Europe (29% sales/+1% as of 9M’20 where FDR fell -9% in 1H’20). Growth in North America (27% sales) remained strong at +26% (vs. +20% expected/+15% in9M’20 and vs. +11% through 1H’20). In adjusted EBITDA, both the operating leverage from the business and the synergy run rate (€ 36 M/100% met) explain +64% growth (vs. +48% BS(e) and consensus) with a 21.7% margin through 9M’20 vs. 20.9% as of 1H’20. Below EBITDA, adjustments and depreciation distort the comparison. NFD came in at € 675 M excluding leases (vs. € 619 M in 1H’20 and our YE € 601 M estimate / ~2x adjusted EBITDA).
The management team hopes for a strong 4Q’20, which would follow the same trend of growth adjusted for currency and the EBITDA margin thus far this year. The sector’s fundamentals remain robust. The current macroeconomic trends and a “stay home” effect bolster sector growth, based on an increased aftermarket base and acceleration in new construction.
In this regard, considering that adjusted EBITDA as of 9M’20 stands at € 248 M and bearing in mind that 4Q is a seasonally weak quarter in sales and margins, in this report, we raise EBITDA’20e by +20% to € 300 M, bringing ourselves to levels +10% above the consensus estimate (€ 273 M) and above the previous guidance’20, which the company withdrew in April 2020 due to Covid-19 (€ 265-285 M). The reason behind this exceptional revision would lie not only in a surprisingly positive performance in sales but also in the run rate of synergies, which suggests that >100% of the target established by the company two years ago will be met. We also raise our long-term estimates: +17% on average in EBITDA from +4.9% CAGR’19-22 to +9.1% vs. the company’s guidance of +9.5%.
On the valuation level, we raise our T.P. by +66% to € 14.87/sh. (+0% upside). 40% of this increase (€ 2.35/sh.) is explained by better sales/EBITDA, and the rest (€ 3.53/sh.) would stem from a revision of the growth rate in perpetuity from +1.5% to +3%, which is in tune with our sales growth estimate in 2022.
We believe that the stock has a positive momentum, as it represents a growth option at the height of the pandemic, but in terms of valuation, we believe it is trading at levels of our T.P. (which already includes FDR’s EBITDA’22 target/in line with the consensus) and thus, we maintain our SELL recommendation. We see a possible divestiture by Rhône Capital (38% of share capital) as a risk, after the lock-up period ended in July’20. We recall that this investor already placed a 4% stake at a price of € 12.68/sh. There will be a conference call at 12:30 (CET). SELL. Target Price: € 8.96/sh. (upside -39.70%)