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ABB India’s (ABB) reported mixed set of numbers for 4CY2011. The company
reported lower-than expected top-line growth; however margin expansion and
low base effect of the corresponding quarter resulted into strong earnings growth.
Order intake during the quarter surged by 58.5% yoy `2,209cr mainly constituted
by large orders (~`1,560cr), leading to a robust order book of `9,129cr. We
expect strong order accretion in the coming quarters, which will lend improved
growth trajectory. In addition, margin recovery in the long term seems likely,
given the pricing in the T&D segment has bottomed out. However, overly expensive
valuations don’t warrant a change in our view; we maintain Sell on the stock.
Growth slips; net up mainly on account of low base: For 4QCY2011, the
company’s top line grew by mere 6.2% yoy to `2,200cr (`2,072cr), which was 8.8%
lower than our (below street) estimate of `2,412cr. For CY2011, the company’s top line
posted healthy growth of 17.1% yoy to `7,449cr (`6,359cr). On the operating front,
EBITDA margin expanded by 333bp yoy to 4.9%, in-line with our estimate (5.1%).
Margin expansion and lower tax incidence boosted the company’s PAT eight-fold (on
the corresponding year’s low base) to `64.1cr, broadly in-line with our estimate (below
street) of `61.9cr. For CY2011, PAT grew by 191% yoy to 184.5cr (`63.2cr).
Outlook and valuation: Strong order wins in past few quarters, gradual recovery in
the operating profitability (due to complete exit from rural electrification projects)
and a debt-free balance sheet makes a strong case for improved fundamentals
going ahead. However, valuations of 47.0x CY2012 PE and 41.8x CY2013E PE
remain overly expensive. We believe the market is factoring in a possible delisting
that is keeping the stock at elevated levels. Hence, we maintain sell on the stock on
valuation basis with a target price of `503 (PE multiple of 24x CY2013E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ABB India’s (ABB) reported mixed set of numbers for 4CY2011. The company
reported lower-than expected top-line growth; however margin expansion and
low base effect of the corresponding quarter resulted into strong earnings growth.
Order intake during the quarter surged by 58.5% yoy `2,209cr mainly constituted
by large orders (~`1,560cr), leading to a robust order book of `9,129cr. We
expect strong order accretion in the coming quarters, which will lend improved
growth trajectory. In addition, margin recovery in the long term seems likely,
given the pricing in the T&D segment has bottomed out. However, overly expensive
valuations don’t warrant a change in our view; we maintain Sell on the stock.
Growth slips; net up mainly on account of low base: For 4QCY2011, the
company’s top line grew by mere 6.2% yoy to `2,200cr (`2,072cr), which was 8.8%
lower than our (below street) estimate of `2,412cr. For CY2011, the company’s top line
posted healthy growth of 17.1% yoy to `7,449cr (`6,359cr). On the operating front,
EBITDA margin expanded by 333bp yoy to 4.9%, in-line with our estimate (5.1%).
Margin expansion and lower tax incidence boosted the company’s PAT eight-fold (on
the corresponding year’s low base) to `64.1cr, broadly in-line with our estimate (below
street) of `61.9cr. For CY2011, PAT grew by 191% yoy to 184.5cr (`63.2cr).
Outlook and valuation: Strong order wins in past few quarters, gradual recovery in
the operating profitability (due to complete exit from rural electrification projects)
and a debt-free balance sheet makes a strong case for improved fundamentals
going ahead. However, valuations of 47.0x CY2012 PE and 41.8x CY2013E PE
remain overly expensive. We believe the market is factoring in a possible delisting
that is keeping the stock at elevated levels. Hence, we maintain sell on the stock on
valuation basis with a target price of `503 (PE multiple of 24x CY2013E EPS).
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