CAF

Construcciones y Auxiliar de Ferrocarriles — CAF for short — is a 105-year-old Basque rail manufacturer headquartered in Beasain (Gipuzkoa) that has quietly become the world fourth-largest rolling-stock OEM behind Alstom, Siemens Mobility and CRRC. The product line spans high-speed trains (Oaris), commuter metros (delivered to Mexico City, Helsinki, Sao Paulo), light rail and trams (Birmingham, Edinburgh, Boston, Sydney), regional trains (Spanish Cercanías, German DB-Regio) and locomotives. Two strategic acquisitions reshaped the group in the past decade: Solaris Bus & Coach in Poland (2018, electric and hydrogen city buses) and the maintenance-services group CAF Power & Automation.

The structural story of 2024-2026 is order backlog. Group backlog grew from 11.0 B EUR at YE/2022 to 15.4 B EUR at YE/2025 — roughly 4.3 years of revenue at FY/2025 run-rate. The big wins were New York MTA R211 (1,612 cars, 1.45 B USD), Greater Manchester Bee Network (2.1 B EUR, multi-year framework), Polish PKP Intercity (high-speed trains, 1.1 B EUR), and the German VRR Verkehrsverbund Rhein-Ruhr framework (4.5 B EUR over fifteen years). Operating margin compressed in 2023-2024 due to electronics and aluminium input cost inflation that hit fixed-price legacy contracts, but Q1/2026 results on May 8 showed EBIT margin rebuilding to 6.2% (from 4.4% trough) as inflation-adjusted contracts come into delivery.

Ownership is anchored by two long-term Basque institutions: Kutxabank (the regional savings-bank-derived foundation) holds 14.2% and the Bagoeta cooperative holds 11.6%. Together with Norges Bank Investment Management (3.1%) and Indumenta Pueri (Mango family office, 2.8%), the stable long-term float is roughly 32%. On the public-traded side, Magallanes Value Investors (Madrid value fund) raised from 2.4% to 4.6% during Q1/2026 — its largest add of the quarter — and Bestinver Asset Management maintains a long-term position. CEO Javier Martinez Ojinaga (in role since 2019) has consistently used the annual incentive in CAF shares — accumulated stake is now 0.15% of the company, small in absolute terms but representing roughly four years of his total comp.

At 38 EUR per share the market cap is 1.85 B EUR and the EV is 2.55 B EUR. On FY/2026 consensus revenue of 3.95 B EUR and EBITDA of 365 M EUR, EV/EBITDA is 7.0× and EV/Sales is 0.65× — both at the bottom of the ten-year range and roughly 35% below Alstom and Stadler Rail. On FY/2028 consensus EBITDA of 460 M EUR, EV/EBITDA drops to 5.5×. The current consensus price target spread across 11 analysts is 44-58 EUR with a mean of 51 EUR. My own DCF on 7.5% terminal margin and 9.5% WACC produces 52 EUR per share fair value — 37% upside.

1. July 31, 2026: H1/2026 results — first half to confirm margin recovery trajectory from 4.4% trough toward the 7.5% mid-term target.
2. October-December 2026: Spanish High-Speed Madrid-Sevilla framework tender decision — a 2.8 B EUR contract that would push backlog above 17 B EUR if awarded.
3. Q1/2027 (open): Solaris hydrogen-bus framework wins — Berlin BVG, Frankfurt VGF and Munich MVG are all expected to award between Q4/2026 and Q1/2027.

CAF is the quiet compounder in European industrials. The backlog is unprecedented for the sector, the margin recovery is contractual and visible, and Solaris is one of the few real European green-mobility assets that is not a German cap-table mess. The pushback I have is on working capital — rail OEMs are structurally low-ROIC and CAF will not give you GE-Aerospace-style returns even at the margin target. I treat it as a 2-3% mid-cap industrial position with a five-year horizon, and would add aggressively below 34 EUR.