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

3Q'20 vs. 3Q'19 Results:
EBIT: € 177.0 M (-80.2% vs. -87.9% BS(e));
Net Profit: € 7.0 M (-98.6% vs. € -36.0 M BS(e) and € -17.0 M consensus);
9M'20 vs. 9M'19 Results:
EBIT: € 694.0 M (-76.1% vs. -78.4% BS(e));
Net Profit: € 196.0 M (-87.8% vs. -90.5% BS(e) and -89.3% consensus);

The results were slightly better than expected, but weak (although improving substantially on 2Q’20). REP has released a figure of € 7 M of adjusted Net Profit in 3Q’20 vs. our estimate of € -36 M and € -17 M consensus (vs. € -258 M in 2Q’20), leaving the 9M’20 figure at € 196 M. For REP to meet our adjusted Net Profit’20e estimate of € 489 M, in 4Q’20 it must generate € 293 M (65% of 1Q’20) and € 208 M to meet the consensus (€ 404 M), which we see as feasible given current crude prices (+7% vs. 2020 average) and refining margins improving slightly vs. 3Q’20. Even if it were not met, we would expect a cut to the DPS’20 (15% yield) that REP conditions to NFD performance, where we are more pessimistic than the consensus for YE2020 (€ 4.86 Bn BS(e) vs. € 4.52 Bn consensus), despite the fact that NFD was a positive surprise in 9M’20: € 3.34 Bn without financial leasing (-16% vs. 1H’20) and € 7.19 Bn with leasing (-10%). It is true that REP benefits from hybrid bond issuances, which compute as debt to a lesser extent, but we had seen this effect in part in 1H’20, and thus we see the 9M’20 figure as very positive and expect REP to surprise the market, as operating cash flow reached € 2.12 Bn in 9M’20 thanks to WC optimisation. Our estimate for NFD at YE2020, adjusting for hybrid bonds, would approach €~4 Bn, and thus the reported figure of € 3.34 Bn remains very positive. REP’s liquidity as of 9M’20 stands at € 9.1 Bn vs. € 9.76 Bn in 1H’20.
As we outlined in our preview, in the absence of negative surprises, which has been the case, and bearing in mind the poor share price performance (-19% vs. IBEX since highs and -15% vs. sector), we expect a good market reaction to these results, especially thanks to the good debt figure. Conference call at 12:30 (CET), where we do not foresee significant long-term guidance that will be unveiled at the CMD on 26/11. BUY, T.P. € 10.80/sh. (+104.86% upside).