Here is a long term idea on Alstom
ALO
a French multinational rolling stock manufacturer.
I will make a case why a long term view on the company is warranted from technical analysis with some commentary on its financials and business operation.
Technical
The weekly chart is presented here. It shows bullish momentum as indicate by my directional movement and cycle analysis indicators.
On the daily chart, the share price has already appreciated more than 10% from its recent low so out of an abundance of caution, investors with short timeframes might wait for better entry. Those a longer time horizon could continue to ride the trend up.
Financial
The company recently took over Bombardier Transportation and in the process took on significant debt. Net cash is also negative mainly as a result of consolidation of Bombardier's business. Admittedly their balance is a reason for concern and it is expected the business combination will take time to integrate. Nevertheless, over time, cost synergies and efficiency should improve.
Operations.
The Group has over EUR70bn in order backlog and a book to bill ratio above 1. At the current revenue run rate of about EUR7bn annually it will take over a decade to fulfill its current backlog ensuring healthy revenue generation in the years to come. The Group has major orders from all over the world for both rolling stock and signaling. In combination with Bombardier, it is competitive in all rolling stock markets from freight, trams, metro, suburban rail to high speed rail. Hydrogen trains is also being tested and could potentially replace diesel units in the future. Some notable orders include:
France - New RER , Grand Paris metro rolling stock, TGV M
US - Avelia Liberty (NE corridor)
Mexico Maya train
Egypt - line 1 upgrade
Germany DB Regio Coradia
India Dedicated freight corridor (DFCC)
I note that with the exception of the next generation TGV M and hydrogen trains, there is nothing in their backlog that Alstom has not produced in the past. This suggests that the company can continue to drive cost efficiencies and margin expansion.
Despite the pandemic, demand for mobility is still increasing. Many countries have only just started to build out its rail infrastructure. I expect Alstom to be able to fulfill a significant slice of this market in the foreseeable future.
ALO
a French multinational rolling stock manufacturer. I will make a case why a long term view on the company is warranted from technical analysis with some commentary on its financials and business operation.
Technical
The weekly chart is presented here. It shows bullish momentum as indicate by my directional movement and cycle analysis indicators.
On the daily chart, the share price has already appreciated more than 10% from its recent low so out of an abundance of caution, investors with short timeframes might wait for better entry. Those a longer time horizon could continue to ride the trend up.
Financial
The company recently took over Bombardier Transportation and in the process took on significant debt. Net cash is also negative mainly as a result of consolidation of Bombardier's business. Admittedly their balance is a reason for concern and it is expected the business combination will take time to integrate. Nevertheless, over time, cost synergies and efficiency should improve.
Operations.
The Group has over EUR70bn in order backlog and a book to bill ratio above 1. At the current revenue run rate of about EUR7bn annually it will take over a decade to fulfill its current backlog ensuring healthy revenue generation in the years to come. The Group has major orders from all over the world for both rolling stock and signaling. In combination with Bombardier, it is competitive in all rolling stock markets from freight, trams, metro, suburban rail to high speed rail. Hydrogen trains is also being tested and could potentially replace diesel units in the future. Some notable orders include:
France - New RER , Grand Paris metro rolling stock, TGV M
US - Avelia Liberty (NE corridor)
Mexico Maya train
Egypt - line 1 upgrade
Germany DB Regio Coradia
India Dedicated freight corridor (DFCC)
I note that with the exception of the next generation TGV M and hydrogen trains, there is nothing in their backlog that Alstom has not produced in the past. This suggests that the company can continue to drive cost efficiencies and margin expansion.
Despite the pandemic, demand for mobility is still increasing. Many countries have only just started to build out its rail infrastructure. I expect Alstom to be able to fulfill a significant slice of this market in the foreseeable future.