ABB India - Recovery Priced In; Result Update Q3CY14 :: Edelweiss PDF link

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ABB India’s (ABB) Q3CY14 revenue at INR18.5bn (up 3% YoY) missed ours and Street’s estimates, mainly due to low traction in the power product business. Margins, adjusted for forex loss of INR110mn, improved by 100bps YoY to 7.3% owing to cost efficiencies in supply chain and higher localisation. However, key disappointment during the quarter was the 20% decline in order intake as orders worth USD100mn were delayed on account of certain procedural issues. We trim our CY14E & CY15E EPS by 12% each as we lower our order intake assumption, leading to drop in revenues. We introduce and roll over our TP to CY16 estimates. At current levels, the, the stock trades expensive at more than 70x P/E on CY15EPS.

Flat revenue growth due to weak traction in product business

ABB reported weak revenue growth for Q3CY14 as the product business reported mere 4% growth. The project business revenues grew 6.5%. Management mentioned customer deferrals continue in certain large-cycle projects, as there is still some hesitancy among corporates to incur capex. Margin of the power product segment was impacted by new one-time investment.

Fewer large projects led to dip in intake; order book declines too

ABB reported 20% dip in order intake to INR14.2bn in Q3CY14 as only few large orders were awarded and orders worth USD100mn were delayed owing to certain procedural issues. Management expects these orders to get reported in Q4CY14. Shorter-cycle orders continue to be healthy. Order book  fell 7% YoY to INR76.2bn. While the product business forms ~60% of order book, the project business constitutes the balance 40%.

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https://www.edelweiss.in/research/ABB-India--Recovery-Priced-In;-Result-Update-Q3CY14/27370.html