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ABB India’s (ABB) Q4CY11 and CY11 numbers were largely in line with
estimates, on back of improved product margins across power and
automation (including discrete). Order intake, at a strong INR22bn (up
58% YoY), surprised positively on back of HVDC LOA recorded during the
quarter, adjusted for which order intake was a decent 18% YoY.
Management commentary continues to be cautiously optimistic.
Maintain ‘REDUCE’ owing to expensive valuations with a target price of
INR 456.
Short cycle margins improve; systems business pain continues
ABB reported a sharp revival in power and automation products’ (both discrete and LV)
margins YoY during the quarter. Power systems business posted loss owing to cost
overrun impact and competitive pricing. However, both power systems and process
automation for CY11 reported significant improvement versus CY10. While the pricing
outlook in T&D products is expected to have bottomed out, we have still not seen signs
of a substantial northward movement in general pricing in the Indian T&D market.
Q4 & CY11 orders surge; revenue visibility improves
The company reported a decent 18 % YoY growth in order intake for Q4CY11 led by
traction across segments, while reported order intake surged a strong 58% YoY led by
HVDC booking of INR5.6bn. For CY11, ABB reported a strong 29% YoY rise in order
intake led by both short cycle and large value projects. Large value projects reported in
CY11 include INR5.6bn HVDC project from PGCIL, INR8bn from ISOLUX for UP
transmission project, INR3bn from BSP, apart from other large orders from Thermax, JK
Paper, TISCO and a few solar EPC projects.
Outlook and valuations: Too expensive; maintain ‘REDUCE’
We expect ABB’s business to incrementally improve both on order intake and margin
fronts given the strong revenue visibility and improving traction in short cycle business.
While we like the company’s diversified business portfolio of automation and power
products and projects, we believe the stock more than factors the margin recovery and
looks expensive. Maintain ‘REDUCE/Sector Underperformer’ recommendation/rating
with a target price of INR 456. The stock trades at a P/E of 59.3x & 52.5x its CY12E and
CY13E earnings respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ABB India’s (ABB) Q4CY11 and CY11 numbers were largely in line with
estimates, on back of improved product margins across power and
automation (including discrete). Order intake, at a strong INR22bn (up
58% YoY), surprised positively on back of HVDC LOA recorded during the
quarter, adjusted for which order intake was a decent 18% YoY.
Management commentary continues to be cautiously optimistic.
Maintain ‘REDUCE’ owing to expensive valuations with a target price of
INR 456.
Short cycle margins improve; systems business pain continues
ABB reported a sharp revival in power and automation products’ (both discrete and LV)
margins YoY during the quarter. Power systems business posted loss owing to cost
overrun impact and competitive pricing. However, both power systems and process
automation for CY11 reported significant improvement versus CY10. While the pricing
outlook in T&D products is expected to have bottomed out, we have still not seen signs
of a substantial northward movement in general pricing in the Indian T&D market.
Q4 & CY11 orders surge; revenue visibility improves
The company reported a decent 18 % YoY growth in order intake for Q4CY11 led by
traction across segments, while reported order intake surged a strong 58% YoY led by
HVDC booking of INR5.6bn. For CY11, ABB reported a strong 29% YoY rise in order
intake led by both short cycle and large value projects. Large value projects reported in
CY11 include INR5.6bn HVDC project from PGCIL, INR8bn from ISOLUX for UP
transmission project, INR3bn from BSP, apart from other large orders from Thermax, JK
Paper, TISCO and a few solar EPC projects.
Outlook and valuations: Too expensive; maintain ‘REDUCE’
We expect ABB’s business to incrementally improve both on order intake and margin
fronts given the strong revenue visibility and improving traction in short cycle business.
While we like the company’s diversified business portfolio of automation and power
products and projects, we believe the stock more than factors the margin recovery and
looks expensive. Maintain ‘REDUCE/Sector Underperformer’ recommendation/rating
with a target price of INR 456. The stock trades at a P/E of 59.3x & 52.5x its CY12E and
CY13E earnings respectively.
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