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UBS Investment Research
ABB Limited (India)
1 Q CY11: Weak quarter
1Q CY11: Another set of weak results
In 1Q CY11, operating income of R17.9bn has increased 22% YoY and EBITDA
margins declined 160bps YoY (led by higher raw material costs). Recurring PAT
(after adjusting for MTM gains) has declined 36% YoY to Rs566m. The results are
below UBS estimates (UBS-e EBITDA of Rs1.3bn and PAT Rs646m).
Growth led by power business, margin pressure likely to continue
In 1Q CY11, power division sales increased 24% YoY (systems grew 50% and
products sales 2%). Automation division sales increased 12% Y-o-Y (products
grew 33% and process grew 9% YoY). The EBIT margin declined in power
products and process automation segments, whereas power systems, discrete
automation and low voltage product segments witnessed improvement in margins.
1Q CY10 order inflow of Rs16.9bn, remained flat YoY
ABB India received orders worth Rs16.9bn in 1Q CY11, same as last year. The
order book of Rs83.29bn in Q1 declined 5% YoY. Key takeaways from the call
are: a) strong inflow of small orders will offset slower intake of large orders, which
are facing procedural delays and b) the company expects strong opportunities in
industrial segment as well, although short term challenges remain.
Valuation: Maintain Sell and PT of Rs590
We use a three-stage DCF methodology to arrive at our price target of Rs590. We
assume 20% medium-term growth (2014-18E), a WACC of 9.8%, and terminal
growth of 5%.
ABB Limited (India)
ABB India (ABB) is a 52.11%-owned subsidiary of Switzerland-based ABB
Group, a global provider of power transmission and distribution (T&D) products
and automation technology. ABB is a leader in the medium- (MV) to highvoltage
(HV) power T&D and process industry automation in India. ABB Group
also uses India as a resource base for its international operations.
Statement of Risk
The keys risks for ABB are: a slowdown in power sector investment, an
industrial slowdown, raw materials risk, competition, employees’ retention and
execution risks. The key risk for our rating is faster than expected recovery and
better than expected margins on current order book.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
ABB Limited (India)
1 Q CY11: Weak quarter
1Q CY11: Another set of weak results
In 1Q CY11, operating income of R17.9bn has increased 22% YoY and EBITDA
margins declined 160bps YoY (led by higher raw material costs). Recurring PAT
(after adjusting for MTM gains) has declined 36% YoY to Rs566m. The results are
below UBS estimates (UBS-e EBITDA of Rs1.3bn and PAT Rs646m).
Growth led by power business, margin pressure likely to continue
In 1Q CY11, power division sales increased 24% YoY (systems grew 50% and
products sales 2%). Automation division sales increased 12% Y-o-Y (products
grew 33% and process grew 9% YoY). The EBIT margin declined in power
products and process automation segments, whereas power systems, discrete
automation and low voltage product segments witnessed improvement in margins.
1Q CY10 order inflow of Rs16.9bn, remained flat YoY
ABB India received orders worth Rs16.9bn in 1Q CY11, same as last year. The
order book of Rs83.29bn in Q1 declined 5% YoY. Key takeaways from the call
are: a) strong inflow of small orders will offset slower intake of large orders, which
are facing procedural delays and b) the company expects strong opportunities in
industrial segment as well, although short term challenges remain.
Valuation: Maintain Sell and PT of Rs590
We use a three-stage DCF methodology to arrive at our price target of Rs590. We
assume 20% medium-term growth (2014-18E), a WACC of 9.8%, and terminal
growth of 5%.
ABB Limited (India)
ABB India (ABB) is a 52.11%-owned subsidiary of Switzerland-based ABB
Group, a global provider of power transmission and distribution (T&D) products
and automation technology. ABB is a leader in the medium- (MV) to highvoltage
(HV) power T&D and process industry automation in India. ABB Group
also uses India as a resource base for its international operations.
Statement of Risk
The keys risks for ABB are: a slowdown in power sector investment, an
industrial slowdown, raw materials risk, competition, employees’ retention and
execution risks. The key risk for our rating is faster than expected recovery and
better than expected margins on current order book.
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