Alstom shares climbed on the Paris Bourse on Monday following a recommendation upgrade by Deutsche Bank, whose analysts believe that "the worst is now over" for the heavily indebted rail equipment group.

At 09:30 GMT, Alstom was up 9.95% at 13.53 euros, while the SBF 120 was up 8.7% at the same time.

Deutsche Bank raised its recommendation on the stock to "buy" from "hold" and left its target price unchanged at 17 euros.

Alstom, which left the CAC 40 on Monday, has been the subject of investor concerns over its debt situation for several months.

Last November, the group said it was considering a capital increase, job cuts and asset disposals, as part of a series of efforts to reduce its net debt by two billion euros by March 2025.

According to analysts at Deustche Bank, the capital increase could be limited to 500 million euros.

"The dilution resulting from a possible capital increase and the risks associated with the execution of the project are now well understood", they added, while Alstom shares were down almost 50% year-on-year at the close on Friday.

Alstom is due to present its detailed deleveraging plan in May, which is likely to trigger a "short squeeze" on the stock, which is among the most heavily shorted in Europe, warn Deutsche Bank analysts.

A "short squeeze" is a forced liquidation of short positions when a stock rises sharply, which is likely to fuel this movement further.

Deutsche Bank analysts note several other catalysts for the stock, including the gradual reduction of loss-making projects, the increase in the proportion of contracts with indexation clauses in the order book, targeted synergies and cost reductions.

(Written by Nathan Vifflin, edited by Blandine Hénault)