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TALGO: 4Q’19 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results:
Sales: € 126.2 M (+44.1% vs. +42.7% BS(e) and +50.5% consensus);
EBITDA: € 22.4 M (+27.7% vs. +28.6% BS(e) and +36.9% consensus);
Net Profit: € 11.5 M (+132.0% vs. +90% BS(e)).
FY2019 vs. FY2018 Results:
Sales: € 401.7 M (+23.8% vs. +23.5% BS(e) and +25.6% consensus);
EBITDA: € 72.9 M (+11.1% vs. +11.3% BS(e) and +13.6% consensus);
Net Profit: € 40.1 M (+50.7% vs. +41.7% BS(e)).

At the closing bell the company released 4Q’19 results that were very much in line with our estimates, but slightly below the consensus. Sales rose +24% vs. 2018 (+24% BS(e) and +26% consensus) thanks to a 4Q’19 that was very much in line with our estimate, but -4.0% below the consensus. Likewise, adjusted EBITDA performed similarly, with a 4Q’19 slightly below the consensus (-6.5%; -50bps in margin) and very much in line with our estimate, with the margin standing at 18.1% for the year (vs. 18.2% BS(e), 18.3% consensus and 18% guidance). The adjusted Net Profit’19 stands at € 40.1 M (+51% vs. 2018), which would be above expectations (+42% BS(e)) due to lower financial costs and a smaller tax burden.
Net cash at the end of the period reached € 59 M, in line with our estimate, but once again below the consensus, which expected € 80 M.
In order intake, the company was awarded € 1.134 Bn of contracts, meaning an average BtB for 2018-19 of 1.6x, which is above the Company’s guidance of 1.3x and our estimate of 1.4x. Furthermore, the Company states that it is working on a pipeline of opportunities worth €~8.4 Bn for the next 24 months.
As for the guidance given for 2020, the company forecasts sharp growth in sales in 2020-21, with revenues standing at ~35% of the backlog for both years (the sum of the two years), slightly below our estimate (-5% and in line with the consensus), which we downplay, as the crucial thing is the backlog, and slight deviations in execution have an insignificant impact on the valuation. In this regard, the company has set itself a target of achieving an average BtB of 1.2x between 2020 and 2021, vs. 0.9x BS(e). As regards the adjusted EBITDA margin, the company has given a guidance of 16.5%, in line with our estimate (and that of the consensus), which could be extrapolated to future years (as the company mentioned in the conference call). Lastly, it expects CAPEX to increase to levels of €~40 M in 2020 (vs. € 15 M expected), which according to the company will increase cost-efficiencies going forward
We expect a neutral or slightly negative market reaction as, despite the fact that the results were quite in line with our estimates, and despite the reasonable guidance given, the results are below the consensus in EBITDA margin and net cash. The stock has underperformed the IBEX by -5% on the year. BUY, T.P. € 6.91/sh. (+26.55% upside).