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Result Reviews
Bosch – 3QCY2011
Bosch (BOS) registered healthy top-line growth of 16.4% yoy (down 3.3% qoq) to
`1,991cr, slightly below our expectation of `2,048cr. Top-line growth was driven
by 15% yoy (down 2.7% qoq) growth in the auto segment and strong 31.5% yoy
(3.3% qoq) growth in the non-auto segment. The diesel systems and automotive
aftermarket segments reported growth of ~13% each during the quarter. Exports
growth was slightly muted and stood at 11% yoy to `287.7cr. Overall growth was,
however, restricted due to a 30% yoy decline in the gasoline systems segment,
which was impacted due to the general slowdown in the passenger car segment.
BOS posted a marginal 43bp yoy contraction in its EBITDA margin to 19.3% due
to higher commodity costs (mainly alloys and steel and adverse currency impact)
and employee expenses. However, a 172bp yoy decline in other expenditure
arrested further margin contraction. Thus, operating profit grew by 13.9% yoy
(1.7% qoq) to `385cr. On a sequential basis, margin expanded by 90bp as the
company benefitted from the qoq decline in raw-material expenses. As a result, net
profit registered strong 22% yoy (3.3% qoq) growth to `288cr. A sharp increase in
other income (up 111% yoy) and interest income (up 46% yoy) also benefitted the
company’s net profit performance.
At `7,205, the stock is trading at 18.6x CY2012E earnings, respectively.
We maintain our Accumulate rating with a revised target price of `7,763, valuing
it at 20x CY2012E earnings.
ABB India – 3QCY2011
ABB India (ABB) announced its 3QCY2011 results, which exceeded ours and
street’s estimates on the top-line front. However, the company continued to
disappoint on the bottom-line front. The company’s top line grew by 29.2% yoy to
`1,744cr (`1,349cr), 13.4% higher than our estimate of `1,538cr. Stellar revenue
growth during the quarter was largely on account of the power division. The power
systems segment grew by 39.1% yoy to `545.2cr (`391.9cr) mainly driven by
strong execution of the projects, which facilitated higher billing. The power
products segment, which has remained muted for the past few quarters, also
jumped back, posting impressive 24.6% yoy growth to `497.6cr (`399.2cr). The
automation division also reported impressive performance with the process and
discrete automation segments delivering 27.5% yoy and 26.1% yoy growth,
respectively. The top line also fared relatively well on a sequentially basis – posting
modest growth of 4.1% qoq.
The company’s EBITDAM slightly improved by 127bp yoy to 3.8%, but it was well
below our estimate of 6.0%. Notably, EBIDAM contracted by ~120bp on a qoq
basis, despite nil provisioning for RE projects, which indicate that cost pressures
weigh heavily on the margin. On a sequential basis, margin erosion was mainly
attributable to the process automation segment, where profitability has been
consistently eroding since the past few quarters. The same was the picture with rest
of operating segments, as these also reeled under margin pressure.
Nonetheless, robust growth translated into strong earnings albeit on low base –
PAT grew by 92.6% yoy to `22.2cr (`11.5cr), however well below our estimate of
`44.8cr.
Strong revenue growth reported in the current year (21% in 1Q, 17.0% in 2Q and
29.2% in 3Q) is doing little to support earnings, as continuous EBITAM erosion
(5.7% in 1Q, 5.0% in 2Q and 3.8% in 3Q) is denting the profitability. Given this,
earnings recovery is far in sight – consistent disappointment in earnings outlines a
bearish view rather than a bullish view. Management commentary also indicated a
passive tone on achieving high single-digit margins (owing to various external
factors). Hence, at the current valuation of 33.2x CY2012E EPS, the stock is richly
valued. Even a meaningful earnings recovery (bull case scenario) does little to
justify such expensive valuation. Hence, we continue to maintain our Sell view with
target price under review.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Reviews
Bosch – 3QCY2011
Bosch (BOS) registered healthy top-line growth of 16.4% yoy (down 3.3% qoq) to
`1,991cr, slightly below our expectation of `2,048cr. Top-line growth was driven
by 15% yoy (down 2.7% qoq) growth in the auto segment and strong 31.5% yoy
(3.3% qoq) growth in the non-auto segment. The diesel systems and automotive
aftermarket segments reported growth of ~13% each during the quarter. Exports
growth was slightly muted and stood at 11% yoy to `287.7cr. Overall growth was,
however, restricted due to a 30% yoy decline in the gasoline systems segment,
which was impacted due to the general slowdown in the passenger car segment.
BOS posted a marginal 43bp yoy contraction in its EBITDA margin to 19.3% due
to higher commodity costs (mainly alloys and steel and adverse currency impact)
and employee expenses. However, a 172bp yoy decline in other expenditure
arrested further margin contraction. Thus, operating profit grew by 13.9% yoy
(1.7% qoq) to `385cr. On a sequential basis, margin expanded by 90bp as the
company benefitted from the qoq decline in raw-material expenses. As a result, net
profit registered strong 22% yoy (3.3% qoq) growth to `288cr. A sharp increase in
other income (up 111% yoy) and interest income (up 46% yoy) also benefitted the
company’s net profit performance.
At `7,205, the stock is trading at 18.6x CY2012E earnings, respectively.
We maintain our Accumulate rating with a revised target price of `7,763, valuing
it at 20x CY2012E earnings.
ABB India – 3QCY2011
ABB India (ABB) announced its 3QCY2011 results, which exceeded ours and
street’s estimates on the top-line front. However, the company continued to
disappoint on the bottom-line front. The company’s top line grew by 29.2% yoy to
`1,744cr (`1,349cr), 13.4% higher than our estimate of `1,538cr. Stellar revenue
growth during the quarter was largely on account of the power division. The power
systems segment grew by 39.1% yoy to `545.2cr (`391.9cr) mainly driven by
strong execution of the projects, which facilitated higher billing. The power
products segment, which has remained muted for the past few quarters, also
jumped back, posting impressive 24.6% yoy growth to `497.6cr (`399.2cr). The
automation division also reported impressive performance with the process and
discrete automation segments delivering 27.5% yoy and 26.1% yoy growth,
respectively. The top line also fared relatively well on a sequentially basis – posting
modest growth of 4.1% qoq.
The company’s EBITDAM slightly improved by 127bp yoy to 3.8%, but it was well
below our estimate of 6.0%. Notably, EBIDAM contracted by ~120bp on a qoq
basis, despite nil provisioning for RE projects, which indicate that cost pressures
weigh heavily on the margin. On a sequential basis, margin erosion was mainly
attributable to the process automation segment, where profitability has been
consistently eroding since the past few quarters. The same was the picture with rest
of operating segments, as these also reeled under margin pressure.
Nonetheless, robust growth translated into strong earnings albeit on low base –
PAT grew by 92.6% yoy to `22.2cr (`11.5cr), however well below our estimate of
`44.8cr.
Strong revenue growth reported in the current year (21% in 1Q, 17.0% in 2Q and
29.2% in 3Q) is doing little to support earnings, as continuous EBITAM erosion
(5.7% in 1Q, 5.0% in 2Q and 3.8% in 3Q) is denting the profitability. Given this,
earnings recovery is far in sight – consistent disappointment in earnings outlines a
bearish view rather than a bullish view. Management commentary also indicated a
passive tone on achieving high single-digit margins (owing to various external
factors). Hence, at the current valuation of 33.2x CY2012E EPS, the stock is richly
valued. Even a meaningful earnings recovery (bull case scenario) does little to
justify such expensive valuation. Hence, we continue to maintain our Sell view with
target price under review.
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