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ABB India: Poor 4QCY10 results
ABB 4Q pre exceptional PBT at Rs531m was significantly below our
estimates and the company reported ebidta margins of only 3.4%. Order
booking declined 41% YoY and the company ended the year with a flat
(YoY) order backlog. ABB has taken steps to clean up its order book by
exiting some of the businesses over the last 12 months and has plans to
launch new products in the Indian market and increasing the localization
content to take on the competition in the domestic market in 2011. We
maintain our negative rating till we see signs of revival in the business.
4Q result – 9% revenue growth (+ve); margins disappoint again
The revenue growth at 9% YoY was the only positive in the 4Q results of ABB.
The company reported ebidta margins of 3.4% during the quarter after
adjusting for forex loss of Rs375m. Power Systems reported sixth consecutive
quarter of EBIT level loss and Power Products and Automation divisions saw
severe margin erosion.
Rural electrification business still hurting
Rural electrification orders and the exit costs pertaining to them continued to
impact the reported earnings of the company. While the management has
said that majority of these projects are now exited there might be some more
pain left which could impact the 1QCY11 earnings as well.
Weak order booking in 4Q
ABB booked order worth Rs13.9bn, down 41% YoY in 4Q. For the year as
whole the company booked Rs63.5bn orders which are down 27% YoY. Part of
the decline is explained by the poor order awards by Powergrid in FY11. The
power sector orders should revive with Powergrid upping its ante going
forward but automation would face challenges if the corporate capex slows
down significantly.
2011 to be a better year?
2010 has been a wash out year for ABB with the company’s performance
hampered by loss making businesses, severe price competition for its
products and poor order booking. ABB has tried to clean up its order book
over the last 12 months by exiting some of businesses like rural electrification
and has itself labelled 2010 as the “year of stabilization”. ABB has mentioned
on its earnings call its plans to launch many new products in Indian
markets/increasing localization (including R&D) content/ and rebuilding the
team under the leadership of new Managing Director – Mr Bazmi Husain. We
will however wait to see signs of revival in the business before we change our
recommendation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ABB India: Poor 4QCY10 results
ABB 4Q pre exceptional PBT at Rs531m was significantly below our
estimates and the company reported ebidta margins of only 3.4%. Order
booking declined 41% YoY and the company ended the year with a flat
(YoY) order backlog. ABB has taken steps to clean up its order book by
exiting some of the businesses over the last 12 months and has plans to
launch new products in the Indian market and increasing the localization
content to take on the competition in the domestic market in 2011. We
maintain our negative rating till we see signs of revival in the business.
4Q result – 9% revenue growth (+ve); margins disappoint again
The revenue growth at 9% YoY was the only positive in the 4Q results of ABB.
The company reported ebidta margins of 3.4% during the quarter after
adjusting for forex loss of Rs375m. Power Systems reported sixth consecutive
quarter of EBIT level loss and Power Products and Automation divisions saw
severe margin erosion.
Rural electrification business still hurting
Rural electrification orders and the exit costs pertaining to them continued to
impact the reported earnings of the company. While the management has
said that majority of these projects are now exited there might be some more
pain left which could impact the 1QCY11 earnings as well.
Weak order booking in 4Q
ABB booked order worth Rs13.9bn, down 41% YoY in 4Q. For the year as
whole the company booked Rs63.5bn orders which are down 27% YoY. Part of
the decline is explained by the poor order awards by Powergrid in FY11. The
power sector orders should revive with Powergrid upping its ante going
forward but automation would face challenges if the corporate capex slows
down significantly.
2011 to be a better year?
2010 has been a wash out year for ABB with the company’s performance
hampered by loss making businesses, severe price competition for its
products and poor order booking. ABB has tried to clean up its order book
over the last 12 months by exiting some of businesses like rural electrification
and has itself labelled 2010 as the “year of stabilization”. ABB has mentioned
on its earnings call its plans to launch many new products in Indian
markets/increasing localization (including R&D) content/ and rebuilding the
team under the leadership of new Managing Director – Mr Bazmi Husain. We
will however wait to see signs of revival in the business before we change our
recommendation.
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