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ABB India – 3QCY2010 Result Update
Angel Broking maintains a Neutral on ABB India.
ABB India (ABB) continued to report disappointing numbers during 3QCY2010.
The company’s revenue contracted by 8% yoy to `1,349cr, while EBITDA and PAT
declined by 75% and 86%, respectively, on a yoy basis. Excluding the adjustments
for forex gain, the operating loss for the quarter stood at `13cr as against
operating profit of `128cr for the year-ago period. During 3QCY2011, ABB
continued to be adversely affected by the exit cost from rural electrification (RE)
projects and lower price realisations. We maintain Neutral on the stock.
Revenue and profitability continue to deteriorate: During the quarter, revenue
across the key segments viz., power products, process automation and discrete
automation reported declines. EBIT margins of all the segments (except discrete
automation and low-voltage products) were negative. The only saving grace was
the forex gain of `48cr, which technically enabled the company to report
marginal profits at the operational and net levels.
Outlook and valuation: ABB has been reporting disappointing results over the
past several quarters amidst heightened competitive pressures. Peer commentary
indicates that pricing pressures in the T&D segment are expected to continue on
account of increased competition from foreign JVs and relaxation of
pre-qualification norms by PGCIL. Going forward, we expect the company to
completely exit from RE projects within a couple of quarters, after which the
provisioning for additional costs is likely to abate and cease. Although the
broader economic scenario has improved to an extent, we believe the current
valuations factor in the same. At the current price, the stock trades at 38.1x
CY2010E EPS and at 28.7x CY2011E EPS, respectively. We maintain our Neutral
view on the stock.
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