Noticias

BICE COMPANY NOTE: ECHEVERRIA IZQUIERDO Strong Results in the E&C Segment. EBITDA in line with Expectations

Noviembre 2019. On November 12th, EISA reported its 3Q19 results, posting a CL$ 5,589 million EBITDA (+33.7% YoY), which came in line with our expectations (CL$ 5,857 million). Net income reached CL$ 2,664 million (+1,2% YoY) which came 9% above our expectations (CL$ 2,434 million). We highlight the strong results turnaround shown in Building & Civil Works and the impressive +103% YoY EBIT growth in the Industrial Construction & Services segment, boosted by an important 203% YoY increase in backlog explained by MAPA and Quebrada Blanca projects. Results were partially offset by the Real Estate segment mainly on high comparable basis, though stock remain healthy. We have a HOLD recommendation in the stock.

Strong results in the Engineering & Construction segment, driven by a positive turnaround in the Building & Civil Works, and an impressive +103% YoY EBIT growth in the Industrial Construction segment. We highlight (1) Building & Civil works reached its historical maximum backlog at CL$ 235,755 million (+17% YoY), driving sales to post +35% YoY. However, gross margin reached 16.6% (vs. +1.9%) so the company posted its second positive EBIT in a row, highly positive compared to the segment’s recent years trend. (2) Industrial Construction posted +203% YoY backlog increase (as expected). However, sales decreased by 24% YoY (below expectations) that could be related to some postponing of projects already awarded (ratio sales to backlog reached its historical minimum level). The decrease in sales were totally offset by a strong 500bps increase in EBIT margin at 7.8%, mainly explained by a higher-than-expected gross margin (8% in the 3Q19 vs. 5% expected).

The Real Estate segment reported EBIT drop on high comparable basis. The Real Estate Segment posted an EBIT of CL$ 628 million (-81% YoY) but highly impacted by a significant comparable basis (CL$ 3,349 million, the largest historical EBIT of the segment). In 2019 the company will be impacted by a lower writing cycle, however the segment seems healthy considering that available stock continue at good levels.

Significant increase in working capital pressured operating cash flow during the quarter. According to our estimates, EISA posted account payable days (vs. 146 median) which resulted in a negative FCFF in the 3Q19. It could be related to the strong increase in backlog, not necessarily a negative issue.