Abril 2020. On March 18th, Echeverría Izquierdo (EISA) reported its 4Q19 results, reaching CL$ 8,371 million EBITDA (+34.5% YoY) which came slightly above our expectations (CL$ 7,816 million) mainly on higher-than-expected results in the E&C segment, partially offset by Real estate. We highlight that the company reached its historical maximum level of EBITDA, net income and backlog in 2019, while is highly contracted towards 2020, which should maintain a sound level of results considering the current challenging environment. We are maintaining our T.P. 2020E and HOLD recommendation for the moment.

Sound results in Engineering & Construction and strong turnaround in the Building segment. The Industrial Construction segment (approx. 50% of consolidated LTM sales) came above our estimates on higher-than-expected top line and EBIT margin (4.2% vs 2.7% expected). EISA reached its historical maximum backlog at the end of a year in 2019 driven by projects such as “Quebrada Blanca 2” and “MAPA”. In turn, the company showed a strong turnaround in the Buildings & Civil Works segment, which came also above our expectations despite negative one-offs in the Building segment related to some contingencies related to some lands in the “Metro” construction in Santiago. According to our estimates, approx. 250% of the consolidated EBIT increase was related to this segment, mainly on low comparable basis (CL$ 1,389 million EBIT vs. -$ 1,240 million operating loss from 4Q18).

Real Estate partially offsetting results. The segment posted CL$ 13,600 million sales and CL$ 1,734 million EBIT, which came below our expectations mainly on lower-than-expected sales due to a slower writing cycle. 2019 sales dropped by 14% (vs. 10%-12% of the guidance). In our current model, we assume a substantial recovery in 2020 as of 2018 levels, however, according to the company the composition could be more focused on Peru than Chile after the October 18th social outbreak in the country. During the results conference call, the company stated they maintain its guidance and believe there are easy ways to increase exposure to this segment overseas, for example by increasing the investment stake in organic growth projects.

Conference call and Covid-19 Implications. On March 26th, the company carried out a conference call, highly focused on prospects regarding the effects of the social outbreak and the spread of covid-19 in the country. According to the company, they were well prepared in terms of cash and contracted projects before the social outbreak. The company recently restructured debt and eliminated contingencies (including a new one by CL$ 5,400 million from Mitsubishi). For 2020, the company is highly contracted and highlight that contracts are cash flow neutral in the short-term. Regarding MAPA and Quebrada Blanca, EISA stated those projects are no going to stop considering the high amount of investment already committed, and declared in the case of force majeure or government resolution, the contractor is the one that carries the costs. In particular, MAPA was suspended by the contractor by 15 days so they assume these costs.