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INDRA: 3Q'21 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'21 vs. 3Q'20 Results
Sales: € 745.2 M (+11.4% vs. +9.1% expected and +9.0% expected by the market consensus);
EBIT: € 87.8 M (+27.2% vs. -29.0% expected and -30.1% expected by the market consensus);
Net Profit: € 59.3 M (+34.8% vs. -35.5% expected and -34.5% expected by the market consensus);
9M'21 vs. 9M'20 Results
Sales: € 2.363 Bn (+9.7% vs. +9.0% expected and +9.0% expected by the market consensus);
EBIT: € 174.6 M (€ -9.0 M in 9M'20 vs. € 135.8 M expected and € 135.0 M expected by the market consensus);
Net Profit: € 114.6 M (€ -31.0 M in 9M'20 vs. € 83.7 M expected and € 84.1 M expected by the market consensus);
The company released after yesterday’s closing bell good results at all levels (sales, EBIT and cash) with the return of dividend payments and upgrade to its guidance’21. 3Q’21 sales grew by +11.4% (vs. +9.1% BS(e) and+10% excluding the contribution from Smartpaper), with growth in both TD (+2.5% in local currency) and Minsait (+16.6% in local currency and +14% excluding consolidation scope: Smartpaper). EBIT as of 3Q’21 came in at € 87.8 M (+27.2% vs. -30% expected), including the capital gains generated with the sale of the San Fernando facilities (€ 17 M). Excl. this impact, EBIT as of 3Q’21 would have come in at € 71 M, also stands far above expectations, with a 9.5% margin (vs. 6.7% BS(e) and 6.5% in 3Q’19).
On the positive side, we stress cash generation on the quarter on a standalone basis, with € 55 M of FCF (€ 40 M excluding the payment of the personnel transformation plan and the capital gains for the sale of San Fernando) vs. € 14 M in 3Q’20 and € -1 M in 3Q’19, leaving the 9M’21 FCF at € 5 M (vs. € -74 M in 9M’20). The company has once again raised its guidance for 2021, now expecting sales in local currency of more than € 3.3 Bn (vs. € 3.2 Bn previously and € 3.29 Bn BS(e)) and EBIT above € 230 M (vs. € >220 M previously and vs. € 224.5 M BS(e) and € 225 M consensus) and FCF before compensations and capital gains > € 140 M (vs. > € 130 M previously and vs. € 127.2 M BS(e)). Moreover, IDR has announced it will resume dividend payments against 2021 reserves (€ 25 M, meaning a DPS of € 0.15/sh., 1.6% yield, pending approval in the AGM), above the consensus and our estimate, as we expected a € 0.106/sh. DPS (1.1% yield and 15% payout).
We foresee a positive impact from these results, which were far above estimates and led to an upgrade to its guidance. We reiterate our BUY recommendation based on: (i) the appealing multiples, with an 8% FCF yield and 9.1x EV/EBIT vs. >11x for its peers; (ii) financial position under control (1.2x NFD/EBITDA’21) with the resumption of shareholder remuneration (1.6% yield’21e), (iii) order backlog near record highs (€ 5.362 Bn in 3Q’21), 1.65x sales, which offers some calm to see further growth in the medium-term. BUY. Target Price: € 11.80/sh (upside 23.43%)