Railcare Group: Transport saves the quarter

Group turnover came in exactly as we had expected, but operating profit was slightly weaker in the second quarter. There was a shift from Q1, when Contracting delivered a positive surprise, to now being weaker than expected, but this was offset by a surprisingly strong Transport division. Large volumes of track replacements limited the space for preparatory work on which the Contracting division focuses, but provided Transport with a strong increase in contract transport, a trend that is expected to continue for the rest of the year. The transition to external customers in Skelleftehamn is proceeding more slowly than anticipated, which is weighing slightly on Technology.

The Maersk contract announced after the end of the quarter was positive news, but we have not yet seen any of the new major transport contracts required for the company to reach its 2027 turnover target of SEK one billion. They will need to have a full-year impact in order to reach the target, and although a delay of one or a few quarters does not matter much in terms of valuation, one should not underestimate the signal this sends to the market if the target is not met. Furthermore, one contract is hardly enough; we have factored in three major contracts, so something needs to come through soon.

Turnover and profit

In terms of numbers, the report was close to our expectations. Revenue for the quarter was 8% higher than last year at SEK 192.3 million (178.1 for Q2-25), which was in line with our forecast of SEK 191 million. The operating margin improved to 10.8% (10.2%) based on a profit of SEK 20.7 million (18.1), which was slightly below our forecast of SEK 22.2 million.

Conclusion: Sales forecast likely to be revised downwards somewhat

In summary, a somewhat uneven but perfectly acceptable quarter in terms of numbers, with the Group’s center of gravity shifting more towards Transport, as expected. Q3 has the potential to be at least as good for Transport as Q2, and Contracting should be able to pick up a little, at any rate. However, the comparables for Q3 last year are tough to beat, as it was a record quarter.

The revenue target of SEK 1 billion by 2027 appears to be slipping further out of reach, and we will likely adjust our revenue forecast downwards a little further from the target when we publish our full analysis in a while, probably in conjunction with an upward adjustment to the risk premium. However, the impact on the justified share price is unlikely to be significant, partly because we have previously built in some “cushion” into that figure, and partly because a delay of one or a few quarters in revenue does not affect the DCF value much – as, based on historical trends, the contracts are likely to materialize quite soon anyway. On the other hand, it is becoming increasingly urgent for Transport to secure at least one new major contract, preferably during Q3, for the sake of credibility.