1Q 2017 results preview
Talgo will report its 1Q17 results on 11th May before the opening, followed by a conference call on the same day at 14:00h CET.
We are expecting –11% sales, continuing the trend seen in the last four quarters. The Saudi contract should generate the majority of sales. The two contracts recently announced (LACTMA and Renfe) ought to start generating sales later in the year. A cost overrun in Russia saw the EBITDA margin dipping to average 18.6% in 2016 and expect this to edge back up to 20% in 1Q17e. We estimate €27mn (–11%) EBITDA, €22mn (-13%) EBIT and €16mn (–11%) Net profit.
Talgo has spent €2.2mn as part of a €10mn share buy back programme, a move that is underpinning the share price (+28.1% YTD absolute, +9.6% relative to the Ibex 35 index). Recent corporate developments in the sector also support this performance. We recommend to Buy with a €5.88 target price.
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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