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MEDIASET ESPAÑA: 9M’19 RESULTS AND T.P. CUT (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results
Sales: € 178.2 M (-5.5% vs. -3.5% expected and -4.7% expected by the market consensus);
EBITDA: € 40.9 M (+18.6% vs. +18.8% expected and +1.7% expected by the market consensus);
EBIT: € 35.9 M (+22.1% vs. +22.4% expected and +4.4% expected by the market consensus);
Net Profit: € 29.6 M (+36.4% vs. +15.2% expected and +15.2% expected by the market consensus);
9M'19 vs. 9M'18 Results
Sales: € 660.7 M (-5.1% vs. -4.6% expected and -4.9% expected by the market consensus);
EBITDA: € 203.9 M (+5.3% vs. +5.3% expected and +2.3% expected by the market consensus);
EBIT: € 190.2 M (+4.7% vs. +4.7% expected and +1.8% expected by the market consensus);
Net Profit: € 157.0 M (+6.9% vs. +3.7% expected and +3.7% expected by the market consensus);

Results basically in line with our estimates although weaker in sales and better than the consensus thanks to the better cost control, with sales coming in slightly weaker than expected. 3Q’19 Sales dropped -5.4%, with net advertising sales falling -7.2% (below our -5% estimate, and with Mediaset Media’s sales sliding -6.8%) and other revenues growing +20.1% (vs. +18.6% BS(e)). The 3Q’19 EBITDA totalled € 41 M (+18.6%) with a 23% margin (vs. 18.3% in 3Q’18) thanks to cost control (3Q’19 OPEX -10.8%). On the positive side, the company cut again its cost guidance again to € 690 M (vs. € 682 M BS(e) and € 689.8 M consensus) from € 710 M previously. Net Profit totalled € 29.6 M in 3Q’19 (+36.6%), above our estimates on lower taxes.
However, following the poor recent share price performance in the past month (-10% in absolute terms and -12% vs. IBEX) and after beating again the consensus in costs and the cost guidance’19 cut, the market reaction could be positive.
We lower our estimates in order to include a more negative TV advertising scenario and the stronger cost control shown by the company to adapt to the greater deterioration in the market. We estimate a -5.6% drop in the advertising market in 2019 (vs. -6.3% in 9M’18 and vs. our previous estimate of -1%, in line with the outlook given by Atresmedia in its results release last week), and likewise we cut our estimate for the 2020-23 period from -1.5% to -3%. With this in mind, we cut our sales’19 estimate by -5.0%, leaving the cost base at € 668 M (-5.2% vs. € 705 M previously), which compared to the guidance would be € 682.3 M, meaning we are below the € 690 M included in the current guidance, which was recently improved
Thus, we cut our T.P. to € 5.50/sh. (-22% vs. the previous T.P.) as a result of the mentioned cut to estimates, and after rolling our model over to 2020. We reiterate caution as we see that the risks have a higher weight on the sector perception given the weakness and limited visibility of the TV advertising market; in addition to the deteriorating macroeconomic context, we stress the gradual fall in audience figures (on lower consumption), the proliferation of digital formats and OTT platforms (despite the subscription model they are stealing audience little by little). The diversification measures (MiTele+, Mediterráneo, with +38% and +96% sales growth in 9M’19, respectively), as well as the flexibility shown in cost control will be enough to offset the fall in traditional advertising revenues, in our view. SELL. Target Price: € 5.50/sh (upside +1.9%)