Talgo: As we expected, 1H17 earnings decline
Talgo reported 1H17 sales of €215mn (-28%), EBITDA 48mn (-16%), with the EBITDA margin of 22% increasing from 19% a year ago, and in-line with 1Q17. The EBIT was €38mn (-19%), PBT €33mn (-24%) and net profit €26mn (-25%). The results are marginally above our estimates, where we expected sales of €201mn and some 2-3mn less than the reported number for EBITDA, EBIT and PBT.
We believe that the shares are unlikely to perform until Talgo receives new orders. The next quarters should see a recovery of the OWC, but this is expected and we do not see it as a catalyst. We recently downgraded Talgo to Hold and maintain our recommendation and target price of €5.71 unchanged.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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