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IBERPAPEL: 2Q’20 RESULTS AND CHANGE OF RECOMMENDATION TO BUY (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results
Sales: € 37.59 M (-29.2% vs. -26.1% expected);
EBITDA: € 6.02 M (-47.3% vs. -48.3% expected);
EBIT: € 3.36 M (-62.2% vs. -66.3% expected);
Net Profit: € 2.7 M (-63.7% vs. -65.1% expected).
1H'20 vs. 1H'19 Results
Sales: € 87.5 M (-25.2% vs. -23.8% expected);
EBITDA: € 12.75 M (-39.1% vs. -39.7% expected);
EBIT: € 7.26 M (-53.9% vs. -56.2% expected);
Net Profit: € 6.03 M (-53.2% vs. -53.9% expected).

Poor 2Q’20 Results, as expected (sales -4% below our estimate but +2% in EBITDA). Sales decreased by -29% (vs -26% BS(e)), slightly below expectations due to electricity sales below our estimate although paper sales were fully in line. Sales dropped -25% YTD vs. 1H’19 due to lower sales volume (-18%) as a result of the impact from Covid-19 and falling paper prices (-7% BS(e)). The EBITDA margin came in at 16% (vs. 15% BS(e); -650bps vs. 2Q’19 and +250bps vs. 1Q’20), leaving EBITDA at € 6 M (-47% vs. 2Q’19; -48% BS(e); -39% in accumulated terms). The 2Q’20 Net Profit came in at € 2.7 M (-64% vs. 2Q’19; -65% BS(e); -53% in accumulated terms).
The company reported € 66 M of net cash vs. € 64 M in the 1Q’20 and € 79 M as of YE’19, with € 6 M of investments on the quarter (we assume for the new pulp manufacturing facilities).
After these results we do not see risks of estimates in 2020, where it is showing resilience in margins despite the lower activity (-45% in EBITDA vs. -25% consensus) or going forward (-6% CAGR’19-22e vs. +0% consensus), and thus, as the upside potentials of the share price in our central-case scenario of V-shaped (T.P. € 26.10/sh.; +46% upside) and U-shaped recovery (+37% upside) exceed +35%, we change our recommendation to BUY. Since our change to SELL (04/06), the share price has slid -18% (-14% vs. IBEX), underperforming the IBEX by -1% since February’s highs (pre Covid-19) and trading at a -15% discount in P/E’21e vs. sector.