May 17, 2021

The change of plans stops Talgo | Economy

The change of plans stops Talgo | Economy

Talgo debuted on the stock market in 2015 and has never exceeded the exit price of 9.25 euros per share (today it is trading at just over five and its capitalization is about 670 million). He lived his lows this year after presenting the results of the third quarter, which reflected lower sales (236 million until October versus 300 million a year befores). But most analyzes agree that it is a passing moment that puts the end of a transition: the one that the company has made to diversify its train portfolio to approach segments where previously it did not compete, oriented to regional and regional transport. .

With an industrial presence in seven countries (in addition to Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and the United States), they had been thinking about expanding their range of products for years. But it was difficult. "We wanted to focus the commercial focus on other areas," they recall in the company. Talgo only manufactured for the highest segments of the train world. It moved in the so-called "very high speed", where machines reach 350 kilometers per hour; the "high speed", a step below and the long distance (200 kilometers per hour). In those products they were comfortable, with fewer competitors and higher margins (Talgo's sales performance is at 20%). And his bet came to introduce a next level, commuter trains and regional.

The workload will increase next year thanks to the macro contract of the AVE

They tried to develop products that did not compete only in the price. "Technologically it was not a challenge, when you've done high-speed trains it's easy to get off. The challenge was to build a train that offered advantages over what was in the market. We were three years until we decided, "they say in the firm. They won the second contest they presented with their new products: a couple of weeks ago they announced an order of 225 million in Latvia, where Pasažieru Vilciens, the public railway company, will buy 32 commuter and regional trains of its VitTal model, from consumption. That, they say, will open doors in other countries.

For César Sánchez-Grande, chief analyst at Ahorro Corporación, in the medium term the opinion on Talgo and its technology different from the rest is positive thanks to the step they have just taken. We must remember that the company manufactures lighter and wider cars than its competitors, with a floor at the level of the platform, thanks to a pendular technology that allows to increase speed by 25% when cornering. "Entering a new segment takes time, but that can give your portfolio stability," he believes.

That stability is the most sought after by the industrial firm controlled by the Trilantic Capital Partners fund in a world pending each quarterly result. It is enough to review what happened since its IPO in 2015. "It was a good market moment but the first risk contained in the issuance prospectus materialized: the dependence on the price of oil. In 2015 we were very focused on exporting countries (Saudi Arabia, Kazakhstan or Russia). The price fell and their plans were canceled or postponed. " In recent years, the execution of the projects has gone well: "We have not had any deviations in terms or budget or quality problems", highlight in Talgo, although they acknowledge having disappointed the market for achieving "a lower workload" of what they expected. Right now they have 2,666 million euros in signed projects, and another 317 million awarded and not signed in maintenance works linked to committed deliveries.

The group is committed to British high speed: they want to sell 54 trains

The commercial rhythm in 2018 has not been entirely favorable, since this year they have obtained contracts for 116 million for the remodeling of the Renfe hotel trains and have invoiced 120 million more in the same period, so if they continue at that speed They would end up "eating" their orders. "In this relationship the Latvian contract is not accounted for because, although it has been awarded, it is not signed. If we add it, we would be at a level [pedidos frente a entregas] very similar ", defend.

Parallel, have finished the contract of the AVE between Mecca and Medina. It has been seven years, with 13 companies involved and a volume of about 7,000 million euros that have given a lot to talk about. As far as they are concerned, the 34 trains involved in the agreement are finished and have sent 24 to Saudi Arabia. In return, up to now they have charged 85% of the contract, according to the stipulated schedule.

Looking to next year, they have hopes placed on several fronts. The first is the British AVE, where they have been prequalified in a contract of 2,700 million pounds (3,000 million euros) to sell 54 trains and cover 30 years of maintenance. The company says it does not fear Brexit. In that bet they compete with the big world manufacturers, from Bombardier to Siemens. They are so determined by the United Kingdom, they say, that they have committed to opening a factory that will provide up to 1,000 new local jobs for engineering and innovation work.

They also work in the manufacture of the 30 trains committed in 2017 within the high-speed macrocontract in Spain, which amounts to 1,300 million between machines and maintenance for 30 years. That, together with the Latvian contract, will mean an expansion of the workforce (currently 2,100 employees) that the company does not specify, but will focus on Spain. In terms of R & D, in such a purely industrial sector there are also major changes that can be seen, above all, in maintenance. "We have an agreement with Google. The trains send the incidents to the base so that, when they arrive at the station, everything is ready to do the maintenance ", they comment in the group.


Debt. Debt: at the end of September the net financial debt is close to zero, because the volume of the loans, of around 250 million euros, is equivalent to the cash that the company has.

Orders The portfolio reaches 2,666 million, almost 3,000 million if unsigned awards are included. The contracting in the first nine months of the year is 116 million.

Benefit. Up to October, net profit of 14.8 million decreased by 58% due to higher financial expenses related to more guarantees needed for manufacturing. Talgo has 59% of the capital on the Stock Exchange. Its main shareholder is the Trilantic venture capital fund, founded by former directors of Lehman Brothers.


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