Talgo shares fell 4.59% mid-morning to 3.74 euros in the Continuous Market. Only Almirall (which today presented results), Grifols A and Bodejas Riojanas and Innovative Solutions Ecosystem recorded a greater punishment on the Madrid parquet.
The company has informed the CNMV that Los Angeles County Metropolitan Transportation Authority (LACMTA) notified Talgo of the termination of a contract for the remodeling of 74 railway vehicles for an amount of 90 million euros, justifying non-compliance with scope and deadlines.
Talgo has decided to paralyze the execution of the contract and will initiate legal action against the LACMTA, as reported to the regulator.
“Negative news that, although for the moment it will not have an impact on the income statement until the resolution of the legal actions is known, we estimate it could be very relevant in the event that the guarantees were executed,” he says. César Sánchez-Grande, Head of Institutional Research Renta 4.
In this sense, “we estimate that currently the difference between what was collected and the degree of execution of the contract and inventory position could be around 15 million negative euros for Talgo”, adds the expert. If the guarantees were to be executed, the impact could amount to the entire amount collected to date, “which we estimate is between 35 and 45 million euros”.
However, in terms of the order book, the impact is very limited and would barely reach 1.5% of the company’s current backlog. Renta 4 maintains the ‘overweight’ recommendation, with a target price of 6.5 euros per share.
Talgo shares have not had a good start in 2022, with an accumulated drop so far this year of almost 30%, which has left its market capitalization at 462 million euros.
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