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PRISA: 1Q'20 RESULTS AND T.P. CUT (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results:
Sales: € 262.5 M (-3.8% vs. -6% BS(e));
EBIT: € 32.2 M (-30.0% vs. -32.8% BS(e));
Net Profit: € -26.1 M (vs. € -40.6 M in 1Q’19).
The company has released poor results hit by Covid-19 and adverse FX, but in line with out estimates. The 1Q’20 sales fell -3.8% (vs. -6% BS(e)), with a sharp drop in Written Press (16% sales, -15%) and Radio (18% sales, -21.2%) and solid performance by Santillana (+5.4%). 1Q’20 EBITDA came in at € 55.8 M (-18.8% vs. -20% BS(e)), falling in all the business lines and to a greater extent in Written Press and Radio (more than -90%). 1Q’20 Net Profit stood at a negative € -26.1 M, due mainly to the impairment from the sale of 30% of MediaCapital (€ -28.8 M). The 1Q’20 FCF came in at € -6 M, leaving the NFD at € 1.07 Bn (€ 1.21 Bn including the impact from IFRS16), and the NFD/EBITDA ratio at 5.3x (7.3x in 2020 BS(e)).
In our scenario of V-shaped recovery we cut our estimates in order to include the impact from Covid-19 and a more adverse exchange rate. We cut sales’20 by -12.5% and EBITDA’20 by -43.5%, and over the 2021-22 period by -5% and -24%, respectively, on average. Most of this revision is centred on the Written Press and Radio businesses (44% of sales’19), with an accumulated drop in EBITDA’20-22 of -75% in Written Press (where in 2020 we expect EBITDA to be negative) and -28% in Radio, whereas Santillana has been more resilient (the impact comes mainly from FX), falling only -13%. Likewise, we lower our valuation to € 0.70/sh. (-56% vs. the previous € 1.70/sh., +20% upside) due to the aforementioned estimates cut and the lower valuation of MediaCapital, which we now value at € 130 M (6.5x EV/EBITDA’20), which has fallen -37% since Confina’s bid in 2019 (which was subsequently cancelled). In a more pessimistic scenario of U-shaped recovery, the additional cut would be around -15%, which would leave our valuation lacking upside.
We do not expect a significant impact from these results, as the stock has vastly underperformed the IBEX since Feb’20 highs, falling -59% in absolute terms (-28% vs. IBEX). We reiterate our cautious message on the stock, given the fact that the upside to our T.P. is not enough to offset the risks and uncertainties weighing on the stock, which still has a high debt level (7.4x and 5.1x NFD/EBITDA’20e and ’21e excluding the impact from IFRS16) and low cash generation (€ -31 M FCF’20e BS(e)).