Alstom cumule défis et handicaps, Exane dégrade son avis à « neutre »

Exane BNP Paribas a abaissé sa recommandation sur Alstom de « surperformance » à « neutre », avec un objectif de cours de 36€.

Dans une étude publiée aujourd’hui, le courtier estime que le groupe d’ingénierie est entré dans un environnement qui lui est moins favorable: montée de la concurrence dans les pays émergents, base de coûts en Europe, taille insuffisante pour absorber des chocs externes, redéployer rapidement sa R&D ou saisir des opportunités de croissance externe.

Source: Exane BNP Paribas

Source: Exane BNP Paribas

La thèse d’investissement d’Exane est la suivante:

La gestion de l’entreprise est dans l’ensemble de bonne qualité, avec une attention portée sur la conquête des marchés émergents. La génération de cash s’améliore.

[cleeng_content id= »918780491″ description= »Plus d\’analyses et de commentaires à découvrir…  » price= »0.19″ t= »article » referral= »0.05″]Mais le groupe a pris du retard sur ses objectifs de prises de commandes, ce qui pourrait être une source de désagrément dans les prochains mois. La revalorisation boursière dépend de la capacité d’Alstom à rester en phase avec sa feuille de route jusqu’en 2015.

Le niveau de prises de commandes aux ventes (« book-to-bill ») s’améliore trop lentement aux yeux du broker. En termes de valorisation, la moindre capacité d’Alstom de convertir son résultat en cash (taux de conversion de 80% contre 100% pour ABB, Schneider ou Legrand) justifie de facto une décote de valorisation.

« Making the most of a tough situation – Execution remains solid
Alstom management is still navigating choppy waters, avoiding the sirens for solar and wind acquisitions at a time when the market called for it. The company’s late entry into the offshore grid market has allowed it to take advantage of ABB’s and Siemens’ woes, and by generally executing according to plan it has been able to avoid the serial writedowns/overruns seen at Siemens or even ABB.
There was the very bad surprise of performance bonds being called in 2010/11 on a rail contract in Budapest (BKV, c. EUR130m) and a power contract in Bulgaria (Maritza, c. EUR130m). But these are exceptions not the rule and we believe that Alstom’s management has over time demonstrated a strong focus on execution and has gradually redeployed the group towards growth markets (50% of backlog). In so doing it has managed to at least partly offset weak demand in mature countries.

Yet the 2013–15 plan starts slowly
In May 2012, Alstom unveiled a new 2013–15 plan to grow sales by over 5% a year and improve the operating margin to around 8% by FY14/15, while maintaining positive FCF every year. This commitment assumed a sound level of orders over the period. Alstom also set an objective of increasing the number of gas turbine orders from 14 in 2011/12 towards 20. Only 12 turbines have been sold so far, of which half are “older generation GT13” and sales were up only 3% in 9m, implying a need for 10% sales growth in Q4 in order to keep on track. Alstom may thus miss part of its objective. This is not a disaster but even a partial setback in the first year of a three year plan is unsupportive of a further rerating of the shares. Companies trading on premium multiples tend to under-promise and over-deliver.
Cash generation profile is improving
Nevertheless, we believe that Alstom’s cash generation profile will continue to improve. The company has indicated that a cash conversion of c. 80% should be in reach in 2015 thanks notably to growing sales and related progress payments and a book-to-bill remaining above 1x, so generating down payments (5-15%). But Alstom’s redeployment in emerging markets remains a negative that Alstom has never quantified. We also expect some positive one-offs to impact positively cash flow over the next 12 months, notably the recovery of the EUR130m BKV performance bond. Overall we anticipate a FCF conversion of c. 70% over the next three years
But Alstom markets remain challenging
The leading indicators for the power generation market (75% of the EV) remain weak and Alstom has lost ground over the last five years, in our view, even in its core European market. We are concerned that a recovery in Europe or even the US may still be a few years away. Alstom is regaining some ground in offshore wind and HVDC but this is acting more as an offset against structural challenges rather than a net incremental improvement.
Order momentum has slowed down
Historically, Alstom’s share price has displayed a strong correlation with momentum in the book-to-bill. However, the recovery in this ratio since early 2011 has not been sufficient to offset the impact of negative cash generation. We expect a book-to-bill of 1–1.05x over the next two years—insufficient, in our view, to generate a further relative rerating.
A more balanced risk/reward
Since May 2012, Alstom shares have regained 50% and the current valuation is more aligned with the fundamentals. We believe that given the volatility of FCF generation through the cycle and the objective of an 80% cash conversion, whereas ABB, Schneider and Legrand can deliver c.100%, a c. 20% discount to sector EBIT multiple looks justified. The balance sheet is stretched, as is underscored by the rights issue required to pay for Transmashholdings. Hence the cost of equity is higher. With only 9% upside and a more stretched asset quality / risk profile than for the rest of the sector, we prefer to downgrade the stock to Neutral and have cut our target price to EUR36.
Emerging-market competition remains a long term threat
Alstom has had difficulty taking advantage of Chinese demand given China’s preference to encourage local infrastructure champions at home and on the international scene. For example, CSR and CNR are already the biggest rail rolling stock players in the world and have digested European technology. Dongfang, Harbin and Shanghai Electric dominate the Chinese generation market and Alstom has had difficulty defending its local presence, even in the Hydro market where it enjoyed a well-entrenched historical position. The failure of the very promising MoU signed with Shanghai Electric two years ago (April 2011) to establish a global boiler JV to actually materialise does not vindicate the view that Chinese infra players still need partnership to develop internationally.
Our sector stance favours short cycle
Our sector stance favours short-cycle industrial exposure as we look forward to an industrial recovery in emerging markets, and especially China. We are also positive on the US, notably the construction market. Alstom’s businesses have a longer cycle exposure and should recover at a later stage, notably in the US.
Where we could be wrong
We could be wrong if Alstom manages to develop further global alliances with EM players, notably Chinese companies. A faster recovery of the US gas market would also be a clear positive. The development of shale gas in the US but also potentially in Europe or Asia could accelerate the recovery of demand for gas turbines. »[/cleeng_content]

 

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