RAIL.ST

Research

  • Sell by Alpha (20/05/2024)
    • 24.00 -13.67% by 01/03/2025

    Railcare is an industrial company in the railway business including transport (50%), contracting & services (30%) and sales of equipment (machines & tech). The company is mainly active in Sweden and the UK (8%). In 2023 the company realized 13.5% revenue growth and almost 20% in earning per share.

    A defensive investment with 25% upside potential in the next 4 years plus 3% annual dividend yield. The very low liquidity is a risk, and can also offer pricing opportunity. In the short-term I expect a 15% correction after strong share price development in 2024.

  • Business (2)
    • Electric locomotive

      Railcare developed an electrical locomotive with battery systems. This Multi Purpose Vehicle is firstly developed for Railcare's own use.

      Locomotives in general are old and dirty machines with high maintenance costs that sooner or later must be replaced with environmental friendly alternatives. This could trigger a change in the sales of electrical locomotives. External sales of MPV's would be a true catalyst, but with a low probability.

      German studies indicate that hybrid and battery locomotives are significant cheaper, upto 80%, than hydrogen driven. My expectation is that hydrogen is the preferred technology in heavy transport given the high energy density (lower weight).
      27/03/2024 by ALPHA
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    • Market growth

      Railcare benefits from several long-term trends, including environmental friendly transport, establishment of new business in northern Sweden and Sweden's NATO membership.

      The Swedish government's budgets for railroad maintenance will increased by 25% until 2033 (compared to the previous 10 year plan).

      Since Apil'23 EU C02 emission rights policy includes transport, which benefits rail transport.
      27/03/2024 by ALPHA
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  • Financial (1)
    • Financial goals

      With the 2023 report the board announced new financial goals for 2027 to reach 1.000Mkr revenue with 13% operating margin. This indicates that earnings per share can increase from 1.80kr to 3.50kr. The share price can move above 40kr (12x PE) when this target is reached.

      27/03/2024 by ALPHA
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  • Risks (1)
    • Low liquidity

      Liquidity is very low and sometimes below 10k/day. On the other hand this can also offer swing trading opportunities.

      15/02/2024 by ALPHA
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