Report on ABB 4QCY10 by Motilal Oswal

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ABB (ABB IN; Mkt Cap USD3.3b, CMP Rs698, Neutral)

ABB India's 4QCY10 performance was impacted by provisions for exit costs on rural electrification projects, increased competition &execution headwinds.

-     Rural electrification contributes Rs700m to the order book v/s Rs2b in June 2010.

-     ABB India has indigenized a 765kV transformer and circuit breaker and it plans to set up its own manufacturing facilities, which will make it more competitive.

-     Renewable energy, in which the company is a global leader, is becoming an interesting opportunity in India, the company said.

-     ABB India is strengthening its design capability and expanding its product portfolio with a view to attracting more outsourcing.

-     We are cutting CY11 earnings estimates and expect CY11 EPS of Rs18.5/share and CY12 at EPS of Rs24.7/share (up 33%). Maintain Neutral with a price target of Rs594 (downside of 15%). Order intake in 4QCY10 was Rs14b (down 41% YoY and down 31% QoQ). The management indicated that several projects had been scrapped.