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INDRA: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
Sales: € 669.0 M (-9.8% vs. -5.3% BS(e) and -5.6% consensus);
EBIT: € 69.0 M (+43.8% vs. +24.0% BS(e) and -11.5% consensus);
Net Profit: € 44.0 M (+41.9% vs. +28.1% BS(e) and -30.3% consensus);
9M'20 vs. 9M'19 Results
Sales: € 2.153 Bn (-5.9% vs. -4.4% BS(e) and -4.5% consensus);
EBIT: € -9.0 M (€ 127.0 M in 9M'19 vs. € -18.5 M BS(e) and € -35.5 M consensus);
Net Profit: € -31.0 M (€ 65.0 M in 9M'19 vs. € -35.3 M BS(e) and € -53.4 M consensus);

Results below expectations in sales (Minsait and air traffic) but better in order backlog (+17.6%, up to € 5.15 Bn), EBIT (even without the one-off from the sale of Metrocall, thanks to greater efficiencies and recovery of delays) and generated cash (3Q’20 FCF € 14 M vs. € -1 M 3Q’19). The 3Q’20 sales fell -9.8% (-5% in local currency) with a negative FX impact of around € 35 M (Brazil and Mexico), below expectations due to the lower sales of Minsait (reported sales -9.6% and -3.1% in local currency) and air traffic (transport and traffic sales in local currency -19%; drop in European air traffic programmes). The 3Q’20 EBIT totalled € 69 M (+48.7% vs. 3Q’19), marked by the capital gains from the sale of Metrocall (€ 36 M, already assumed in our estimates). Excluding this impact, EBIT would have come in at € 33 M with a 4.9% margin (vs. 8.1% in 3Q’19), hit by delays and lower activity by around € 14 M. The 3Q’20 cash reached € 51 M (€ 14 M excluding the sale of Metrocall vs. € +1 M BS(e)), above that seen in 3Q’19 (€ -1 M and our estimates) and NFD € 626 M (vs. € 670 M in 2Q’20). The company reiterates its guidance’20, although it considers that the sales target will be “challenging, although attainable”, and expects a better performance in cash generation (no details given). The company forecasts between € 3.15 Bn and € 3.2 Bn in sales (vs. € 3.17 Bn BS(e)) and € 120-135 M of EBIT (vs. € 167 M BS(e)) before expected one-off costs totalling € 166.4 M (€- 39 M in cash cost; to be executed); the € 166.4 M are broken down as follows: € 95 M from impairments in intangible assets in 2Q’20 and €~-65 M from its plan to obtain € 100 M in cost savings annually starting in 2021, 3.4% OPEX’19, with a positive impact of € 75 M on cash.
The results were a mixed bag, showing a negative slant in sales (delays in air traffic and Minsait, especially America) but robustness in cash-flow and margins, as well as a good outlook in the medium-term thanks to a good backlog performance (rooted in TD, sales with higher margins). The uncertainties that could arise as a result of the worse sales performance should be widely offset by the better figures in cash/margins/order backlog and by the poor share price performance in 2020 (-44% in absolute terms in 2020 and -14% vs. IBEX). BUY. T.P. € 9.50/sh. (upside +67.55%).