HES Oct’20 sales advance 8.6% YoY; management expects a 20.3% drop in Nov’20 revenue (NEUTRAL)

20.11.2020 Source: Hydraulic Elements and Systems; FFBH

Hydraulic Elements and Systems (HES) revealed 8.6% YoY increase in monthly sales to BGN 5.9m in Oct’20, beating the management’s expectations by 2.8 p.p. Pre-tax earnings for the month skyrocketed 174.1% YoY to BGN 1.3m, due to state subsidies related to COVID-19 socio-economic measures and reduction in depreciation charge. This brought the respective margin to 22.9%, which represents a 13.8 p.p. improvement, compared to Oct’19. YtD sales still remain below last year’s level at BGN 43m (-19% YoY), however 10-mo EBT advanced above the result for the respective period of last year and reached BGN 5.2m (+15.2% YoY). The YtD EBT margin came to 12.1%, which is a 3.6 p.p. improvement on an annual basis. The management forecasts a 20.3% YoY decrease in Nov’20 revenue (BGN 4.3m), which would further contribute to the underperformance in YtD sales (BGN 47.3m) compared to the corresponding year-ago period and would represent a 19.1% YoY decrease.