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ABB India
Rec. PAT fall 6% despite sales
+22%; Underperform
�� Rec PAT fell for the 11th quarter in a row; Maintain UPF
ABB Rec PAT fell for the 11th quarter in a row at Rs577mn by 6%YoY on
increasing price pressure in T&D space from Siemens, Areva, CRG, Chinese and
Korean players, continued costs on exit from rural discom business and depleting
visibility (backlog 1.1x sales). Order backlog fell 5%YoY as inflows were flat on
delay in conclusion of large orders and improved execution (sales +22%YoY). We
raised our CY11-13E sales by ~3% to factor-in acquisition of ABB Global
Industries and Services from parent but cut EPS by 3% for CY12E on higher
funding / fixed costs. We raise PO to Rs575 (545) on roll-forward. Lack of visibility
in earnings, rich valuations (34x CY12E), 36% downside on our PO drive UPF.
Strong execution offset by continuous pressure on margins
ABB 1Q11 execution surprised with sales +22%YoY while 158bps fall in margins
on 249bps rise in material cost led by copper cost pressures led Rec PAT to fall
6%YoY. While reported PAT grew by ~9x on Rs20mn of exchange gain (vs loss
of Rs544mn in 1Q10). Sales was up led by 24%YoY growth in projects business
(54% of sales) - power systems +50%YoY and process automation +15%YoY vs
products business (46% of sales) +12%YoY - power product +2%YoY and
automation & low voltage products +11%YoY.
Slow growth and rich valuation = Underperfrom
ABB had one of the worst 1QCY11 results among our E&C universe. Think that
ABB’s slowed growth is a de-rating trigger for the stock. At PE of 20x of 1-year
forward EPS, we derive 12-month fair value of Rs575 implying 36% downside.
Hence, Underperform.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ABB India
Rec. PAT fall 6% despite sales
+22%; Underperform
�� Rec PAT fell for the 11th quarter in a row; Maintain UPF
ABB Rec PAT fell for the 11th quarter in a row at Rs577mn by 6%YoY on
increasing price pressure in T&D space from Siemens, Areva, CRG, Chinese and
Korean players, continued costs on exit from rural discom business and depleting
visibility (backlog 1.1x sales). Order backlog fell 5%YoY as inflows were flat on
delay in conclusion of large orders and improved execution (sales +22%YoY). We
raised our CY11-13E sales by ~3% to factor-in acquisition of ABB Global
Industries and Services from parent but cut EPS by 3% for CY12E on higher
funding / fixed costs. We raise PO to Rs575 (545) on roll-forward. Lack of visibility
in earnings, rich valuations (34x CY12E), 36% downside on our PO drive UPF.
Strong execution offset by continuous pressure on margins
ABB 1Q11 execution surprised with sales +22%YoY while 158bps fall in margins
on 249bps rise in material cost led by copper cost pressures led Rec PAT to fall
6%YoY. While reported PAT grew by ~9x on Rs20mn of exchange gain (vs loss
of Rs544mn in 1Q10). Sales was up led by 24%YoY growth in projects business
(54% of sales) - power systems +50%YoY and process automation +15%YoY vs
products business (46% of sales) +12%YoY - power product +2%YoY and
automation & low voltage products +11%YoY.
Slow growth and rich valuation = Underperfrom
ABB had one of the worst 1QCY11 results among our E&C universe. Think that
ABB’s slowed growth is a de-rating trigger for the stock. At PE of 20x of 1-year
forward EPS, we derive 12-month fair value of Rs575 implying 36% downside.
Hence, Underperform.
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