(Boursier.com) — Alstom fell 1.4% to 11 euros this Wednesday, while AlphaValue reduced the target from 30 to 25.6 euros on the value while remaining a purchase. Oddo BHF (‘outperform’) returned to the issue recently, one of the “hot” stocks of the moment on the Parisian market after the fall in prices, while the increase in production that the group must face to deliver the 90 billion euros of unfilled orders is not completed. “The group still has a year and a half of ramp-up to manage,” recalled Oddo BHF. Enough to weigh on the WCR, with an increase in stocks and projects in progress…
In H1 2023/24, the signing of several contracts was delayed, in particular due to a deterioration in the macroeconomy (increase in contract prices and their financing due to the rise in rates) and tensions geopolitical (Israel, MO)… This implies an H2 which will not necessarily be much more dynamic in terms of order intake, with a ‘book-to-bill’ probably below 1x for the rolling stock part. These two elements, the production ramp-up and the delay in orders, could put H2 FCF at risk, even if the latter will be positive.
The broker explained that the company will have to arbitrate between the sale of quality assets (likely to impact growth and margin in the long term) and costly measures (the cost of quasi equity could reach 7% according to the broker), and the capital increase which would be dilutive (25% estimated on the basis of a capital increase of €1 billion). Concrete elements are expected within 6-9 months…
The railway giant has struggled to get its head back on track since its big warning at the beginning of October, followed by the announcement of a major restructuring plan to restore its balance sheet. As part of its half-yearly publication, the group announced on November 15 the launch of an asset sale program of between 500 and 1 billion euros, the elimination of 1,500 jobs and a possible capital increase. .
Upcoming disposals
Concerning these asset sales, some analysts understand that Alstom plans to sell units in the United States and China, for which it hopes to obtain up to 1 billion euros… “It will be difficult to hope more than 500 million euros” for the sale of the signaling activities acquired from General Electric in 2015, according to ‘BFM’. The information site adds that “the French group is separating because the activity is concentrated in the United States and on sparse networks, where Alstom operates little.”
In China, where Alstom operates via joint ventures, the game does not look much easier… “The three largest, Casco, Sifang and Jiangsu, are valued at 780 million euros on Alstom’s balance sheet and bring in a little more of 100 million euros in profit per year”, ‘BFM’ further underlined. “The price will depend on the Chinese government,” summarizes a source close to the group. “But Alstom does not want to leave China by selling off its shares.” The solution for Alstom could consist of bringing in an investor alongside it in order to “recover cash, while retaining its positions in the joint ventures”.
Under these conditions, the capital increase mentioned as a possible avenue has logically gained momentum on the market in recent weeks, maintaining pressure on the stock on the stock market.