CAF Strengthens Reputation, Strategy With contracts worth 110 M€

CAF's tramsCAF's trams, France

Spanish midcap CAF has won a €51.3 million contract in Germany to supply 9 three-car light rail vehicles for the Schönbuchbahn and their maintenance over 19 years, with the option to request up to an additional 19 trains. In addition, the company has obtained the contract to supply another 4 units for the Santiago de Chile underground and 2 more for the Medellin underground. These two contracts are worth over €59 million.

The new contract in Germany is only CAF’s second one in that country, after signing a contract in March 2013 to supply trams to the city of Freiburg. For Bankinter analysts, the new contract consolidates the company as a supplier in Germany, one of the most attractive and demanding markets in Europe.

Apart from what it’s worth, this contract will boost CAF’s reputation and position it well in terms of the possibility of winning future ones.

The extension of the contracts in Chile and Colombia show that the units already supplied and/or the development of the contracts up to now have been well received by the clients in both countries. Bankinter experts explain:

These type of contracts and/or their extension, for a product line similar to the 146 trams’ contract awarded by De Lijn and Antwerp in November 2016, strengthen CAF’s position in the segment of short and medium-range trains. And they represent a key strategic market niche for the company. For that reason, this news is more relevant strategically than economically (€110 million for an order pipeline worth 4.9 billion = +2.2%)

Finally, Kepler Cheuvreux analysts highlight that CAF’s backlog reached a record high of €5.9 billion as of September 2016. This is around 4.5x 2016E revenues.