On Monday, Deutsche Bank raised its recommendation on Alstom shares from 'hold' to 'buy', believing that 'the worst is over' for the rail equipment manufacturer.

In a research note, the analyst - who maintains his price target of 17 euros - looks back at the two-billion-euro debt reduction plan recently announced by the group, and anticipates a limited capital increase of around 500 million euros.

The dilutive effect of this capital raising project, as well as the risks of contract execution, are now well integrated by the market, now that the stock has lost 54% in one year", Deutsche points out in the study.

With Alstom scheduled to unveil details of its debt reduction efforts in May, the professional says it is considering a scenario of forced liquidations of short squeezes on the stock, currently one of the best-selling in Europe.

DB also sees potential for improvement in the company's profit margins and free cash flow (FCF), calculating that a 0.5 percentage point increase in margins would have a positive impact of 90-100 million euros on FCF.

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