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SIEMENS GAMESA: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results:
Sales: € 2.204 Bn (-9.6% vs. -11.2% BS(e) and -9.5% consensus);
Adjusted EBIT: € 33 M (-81.6% vs. -65.5% BS(e) and -56.2% consensus);
Adjusted Net Profit: € 15 M (-86.7% vs. -67.2% BS(e) and -61.9% consensus).

The company has released poor 2Q’20 results that were slightly above our expectation in sales (-3.4%) and in line with the consensus. However, on the adjusted EBIT level (before PPAs and restructuring costs) the results were -46% below our estimate (coming in at € 33 M) and -57% below the consensus. The adjusted EBIT margin came in at 1.5% (vs. 7.5% in 1Q’20). Reported Net Profit fell to € -165 M (vs. € -28 M BS(e) and € -34 M consensus), hit by higher restructuring and integration costs than expected (€ 82 M vs. € 27 M BS(e)), due apparently to India (€ 38 M, no cash outflow), where the company has adapted to the new market outlook (delay in market recovery). Adjusted Net Profit would have fallen -60% vs. our estimate (-65% vs. consensus). Note that recently the company withdrew its 2020 guidance (sales between € 10.2-10.6 Bn and adjusted EBIT margin between 4.5-5.5%) as a result of its inability to currently predict the impact of the Covid-19 crisis on its accounts.
The backlog came in at € 28.62 Bn (+21% vs. 2Q’19) although order intake fell by -11% vs. 2Q’19 to € 2.2 Bn (1x BtB). The orderbook for projects scheduled for 2020 would total € 10.4 Bn (€ 6.2 Bn in the 2H’20), although, as of today, we believe that the Covid-19 crisis might cause delays and thus, the orderbook’20 might stand below levels of € 10 Bn BS(e). As for prices, the ASP increased significantly (€ 0.78 M/MW vs. € 0.63 M/MW in the previous quarter), backed by the geographic mix and the reach of the projects, although the company mentions price stability.
Net debt stands at € 295 M, slightly worse than our estimate (€ 217 M BS(e)). In this regard, the company highlights its liquidity position, as it has €~2.9 Bn in available credit lines.
As the results came in below expectations in adjusted EBIT, we could expect a poor market reception, especially after its +16% outperformance vs. the IBEX since Feb’20 IBEX highs, when the Covid-19 crisis began to be felt. With the revision of estimates we plan to carry out, in our scenario of V-shaped recovery (two quarters of deep recession and strong recovery starting in the third) we would cut our adjusted EBIT’20 by -38% (-4% on average in 2021-22) and our T.P. would be reduced to € 12.50/sh. (-9% potential; -5% vs. previous T.P.). In our scenario of U-shaped recovery (deep economic recession for 2 quarters, moderate recovery in the third quarter and strong in the fourth quarter and 2021) we would cut adjusted EBIT’20e by -54% (-14% on average in 2021-22) and our T.P. would fall to € 11.70/sh. (-13% potential; -10% vs. previous). SELL. T.P. € 13.07/sh. (potential -4.56%).