2016 Results preview
For the year 2016e, we are expecting Talgo to report a +14% increase in sales to €594mn, driven by sales to Saudi Arabia, Kazakhstan and Uzbekistan. A cost overrun in Russia accounted in 1H16 should be reflected in a 160bp deterioration of the EBITDA margin and a +4.7% increase in EBITDA, below the growth in sales. For the EBIT we expect a +7.1% increase and +5.2% for the PBT. A higher tax rate (from 21% to 24%) should leave the Net profit flat at €60mn.
In 2017e we expect that the completion of the Saudi contract will drive sales growth, collections will prompt a recovery in OWC and €191mn of FCF to be generated (versus –€34mn in 2016e). This situation allows Talgo to start paying dividends. We expect a 1.6% yield, €10mn to be paid. The announcement of a €10mn share buy-back programme (1.8% of its shares) hints that shares may be given as dividends.
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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