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Please refer to important disclosures at the end of this report 1

EBITDA 106.0 85.5 24.0 97.5 8.7

EBITDA margin (%) 5.6 5.0 63 5.4 18

Source: Company, Angel Research

ABB India (ABB) reported better than expected numbers for 2QCY2012. It

reported in-line top-line growth of 10.0% and better than expected bottom-line

growth of 33.3%. The order intake during the quarter was up 14%, taking the

total order book to `9,175 up 9.0% yoy, implying a sales coverage 1.2x. Weexpect order flow to improve over the coming quarters which will lend to

improved growth trajectory. In addition, margin recovery in the long term seems

likely, given that the pricing in the transmission and distribution (T&D) segment

has bottomed out. However, on the back of expensive valuations

For 2QCY2012, the companys revenue came

in at `1,884cr, up 10% yoy and 5.2% qoq. The revenue growth was robust

through all the segments with low voltage products leading at 18.1%. Power

systems, power products and process automation grew at ~12%. EBITDA margins

for the quarter came in at 5.6%, up from 5.0% yoy and slightly above our

estimate of 5.3%. Power systems saw a sharp revival in profitability with EBIT

margins at 5.0%, up from -0.7% yoy. However, process automation saw declining

margins for the quarter at -2.5%. Automation products also saw a steep increase

in EBIT margins at 12.8%, up from 7.6% yoy.

With decent order flows expected in power products and

power system segments, along with recovery in profitability due to supply chain

initiatives and exit from rural electrification projects coupled with a debt free

balance sheet, we expect ABBs fundamentals to steadily improve going forward.

However, with the share trading at 38x PE on our CY2013E EPS estimates, we

believe the share remains overvalued. Hence,

.

% chg 0.8 17.2 18.9 14.4

% chg (82.2) 191.8 42.7 67.0

EBITDA (%) 1.3 3.8 5.5 7.5

3.0 8.7 12.4 20.7

P/E (x) 264.3 90.5 63.5 38.0

P/BV (x) 6.9 6.6 6.1 5.4

RoE (%) 2.6 7.5 10.1 15.2RoCE (%) 1.3 8.3 14.6 22.0

EV/Sales (x) 2.6 2.2 1.9 1.6

EV/EBITDA (x) 192.3 57.9 34.3 22.0


CMP `789

Target Price `498

Investment Period 12 Months

Stock Info

Sector

Market Cap (`cr)

Net Debt (`cr)

Beta

52 Week High / Low

Avg. Daily Volume

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Bloomberg Code

Shareholding Pattern (%)

Promoters 75.0

MF / Banks / Indian Fls 12.9

FII / NRIs / OCBs 3.3

Indian Public / Others 8.8

Abs. (%) 3m 1yr 3yr

Sensex 7.8 4.2 15.8

DLF 9.7 (2.0) 18.3

ABB.BO

ABB@IN

Capital Goods

16,732

1.0

(315)

1037/541

74,233

2

17,561

5,323

+91 22 3937 7600 Ext: 6817

[email protected]

Performance Highlights

2QCY2012 Result Update | Capital Goods

August 9, 2012

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ABB India | 2QCY2012 Result Update

August 9, 2012 2

Exhibit 1:Quarterly performance

Net Sales 1,858 1,693 9.8 1,773 4.8 7,370 6,287 17.2

Other operating income 25 19 17 79 72

Stock adjustments (7) (79) (8) (85) (10)

Raw Material 1285 1239 3.7 1216 5.7 5,563 4,812 15.6

(% of total income) 71.1 71.9 71.2 73.5 75.5

Employee Cost 175 147 19.5 149 17.7 587 490 19.7

(% of total income) 9.3 8.6 8.3 7.9 7.7

Other Expenses 262 248 5.6 267 (1.6) 1022 911 12.1

(% of total income) 13.9 14.5 14.9 18.4 18.9

(EBITDA %) 5.6 5.0 5.4 4.9 2.5

Interest 8 7 15.0 5 41.7 31 17 76.4

Depreciation 23 26 (12.5) 22 3.5 80 52 54.0

Other Income 1 7 2 16 13

PBT (%) 4.1 3.4 5.5 3.6 1.6

Total Tax 25 20 23.8 24 4.2 83 37 124.9

(% of PBT) 32.6 34.3 33.5 31.1 36.9

PAT Margins(%) 2.7 2.3 2.7 2.5 1.0

EPS (`) 2.4 1.8 33.3 2.2 8.4 8.7 3.0 192.3


Exhibit 2:Actual vs. estimates

1,883.8 1,883.8 0.0

EBITDA 106.0 99.8 6.2

Interest 7.7 5.4 41.7

Tax 25.0 22.8 9.7

51.6 47.3 9.1


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August 9, 2012 3

For 2QCY2012, the companys revenue was at

`1,884cr (+10% yoy, +5.2% qoq). The revenue growth was robust through all the

segments with low voltage products leading at 18.1%. Power systems, power

products and process automation grew at ~12%.

Exhibit 3:Revenues for the quarter remains flat


Exhibit 4:Segment-wise performance

Power Systems 569 508 12.0 569 (0.0) 2,362 1,827 29.3

Power Products 528 469 12.6 458 15.2 2,001 1,816 10.2Process Automation 329 294 12.1 304 8.4 1,322 1,189 11.2

Discrete Automation 451 421 7.0 414 8.8 1,799 1,593 13.0

Low Voltage Products 151 127 18.1 145 4.1 539.9 448.6 20.4

7.3

Power Systems 29 (3) (914.9) 28 1.1 (1) (111) (99.2)

Power Products 29 22 32.9 11 173.1 100 82 21.9

Process Automation (8) 15 (156.1) 8 (200.7) 38 82 (53.8)

Discrete Automation 58 32 79.7 43 33.1 207 132 56.4

Low Voltage Products 7 13 (41.6) 8 (10.5) 34 2 1,786

46.4 15.8

Power Systems 28.1 27.9 30.1 29.4 26.6

Power Products 26.0 25.8 24.2 24.9 26.4

Process Automation 16.2 16.2 16.1 16.5 17.3

Discrete Automation 22.2 23.2 21.9 22.4 23.2

Low Voltage Products 7.4 7.0 7.7 6.7 6.5


(20)

(15)(10)(5)05101520253035

-

500

1,000

1,500

2,000

2,500

3QCY08

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Sales (` cr, LHS) Growth (yoy %, RHS)

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August 9, 2012 4

Exhibit 5:Power systems: Revenue and growth


Exhibit 6:Power product: Revenue and growth


Exhibit 7:Process automation: Revenue and growth


Exhibit 8:Discrete Automation: Revenue and growth


EBITDA margins for the quarter came in at 5.6%, up

from 5.0% yoy and slightly above our estimate of 5.3%. Power systems saw a

sharp revival in profitability with EBIT margins at 5.0%, up from -0.7% yoy.

However, process automation saw declining margins for the quarter at -2.5%.

Automation products also saw a steep increase in EBIT margins at 12.8% up from

7.6% yoy.

Exhibit 9:EBIT margins on a recovery path


(43.2)

(12.7)(12.8)

(25.4)

(43.2)

(14.5)(10.1)2.8

48.9 49.6

21.7

39.4

15.2

(0.6)

12.0

(60)

(40)

(20)

0

20

40

60

0

160

320

480

640

800

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Power Systems Growth (yoy %, RHS)

26.8

(0.1)(2.2) (3.8) (4.1)

1.4

(11.5)(15.7)

(8.8)

1.95.6

24.6

10.1

4.1

12.6

(20)

(10)

0

10

20

30

0

160

320

480

640

800

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Power Products Growth (yoy %, RHS)

62.0

(14.9)

10.0

(2.9)(12.7)

14.0

(27.8)

(9.2)

3.6

15.1

30.127.5

(7.1)(7.9)

12.1

(40)

(20)

0

20

40

60

80

0

160

320

480

640

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Process Automation Growth (yoy %, RHS)

27.027.5

(21.9)(19.5)

7.4 6.7

28.4

14.7

(23.1)

(13.8)

5.4

15.4

26.1

8.1

(0.8)

7.0

(30)

(20)

(10)

0

10

20

30

40

0

160

320

480

640

3QCY08

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Automation products Growth (yoy %, RHS)

(15)

(10)

(5)

0

5

10

15

20

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

Power Systems Power Products Process Automation Automation products Low Voltage Products

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August 9, 2012 5

Order intake during the quarter increased by 13.3% yoy, which

was mainly led by the power segment. Order backlog stands at `9,175cr for

2QCY2012, up 9% yoy, implying order book coverage of 1.2x.

Exhibit 10:Order inflow trend


Exhibit 11:Order backlogtrend


(60)

(40)

(20)

0

20

40

60

80

100

0

500

1,000

1,500

2,000

2,500

3,000

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

Order inflow (` cr, LHS) Growth (yoy %, RHS)

(10)

0

10

20

30

40

50

0

2,000

4,000

6,000

8,000

10,000

3

Q08

4

Q08

1

Q09

2

Q09

3

Q09

4

Q09

1

Q10

2

Q10

3

Q10

4

Q10

1

Q11

2

Q11

3

Q11

4

Q11

1

Q12

2

Q12

Order backlog (` cr, LHS) Growth (yoy %, RHS)

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August 9, 2012 6

With decent order flows expected in power products and

power system segments along with recovery in profitability due to supply chain

initiatives and exit from rural electrification projects coupled with a debt free

balance sheet, we expect ABBs fundamentals to steadily improve going forward.However, with the share trading at 38x PE on our CY2013E EPS estimates, we

believe the share remains overvalued. Hence,

.

We largely maintain our estimates for CY2012E and

CY2013E but reduce our EBITDA margin estimate to 5.5% for CY2013E leading to

a decline of 27.5% and 31.8% in EBITDA and PAT respectively for the same year.

Exhibit 12:Change in estimates

Revenues 8,760 8,760 0.0 10,023 10,023 0.0

EBITDA 662 479 (27.5) 748 748 0.0

PAT 386 263 (31.8) 440 440 0.0

Source: Company

Exhibit 13:Angel EPS forecast

CY2012E 12.4 15.4 (19.3)

CY2013E 20.7 21.3 (2.7)

Source: Company

Exhibit 14:One Year Forward P/E Band


0

300

600

900

1,200

1,500

1,800

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Feb-12

Jun-12

Share price (`) 25x 35x 45x 55x

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August 9, 2012 7

Exhibit 15:Peer Comparison

BHEL Neutral 232 - - 1.9 1.7 9.0 9.7 (9.1) 28.8 23.1 22.7 18.3

BGR Energy Neutral 274 - - 1.6 1.4 9.1 8.5 (3.4) 11.8 10.6 18.3 17.6

Crompton Greaves Accum. 117 128 9.6 1.9 1.7 17.9 12.8 17.6 13.7 17.5 11.1 14.2

Jyoti Structures Buy 38 59 53.2 0.4 0.4 4.4 2.9 4.6 15.4 17.9 10.3 14.0

KEC International Buy 56 74 32.0 1.1 0.9 5.2 4.5 36.8 20.9 22.4 26.9 27.2

Thermax Neutral 512 - - 3.3 2.9 19.1 18.0 (8.5) 20.6 20.1 18.4 17.1

Source: Company, Angel Research. Note*: December year end

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August 9, 2012 8

Profit and loss statement

% chg (8.8) 0.8 17.2 18.9 14.4

Raw Materials 1,823 2,577 2,717 3,138 3,442

Mfg costs 2,695 2,225 2,761 3,504 4,009

Personnel Costs 389 490 587 753 802

Other Costs 803 911 1,022 885 1,022

% chg (31.5) (84.1) 238.0 69.3 55.9

(% of Net Sales) 8.5 1.3 3.8 5.5 7.5

Depreciation & Amortization 49 52 80 98 111

% chg (34.7) (93.3) 534.1 87.3 66.8

(% of Net Sales) 7.7 0.5 2.8 4.4 6.3

Interest & other Charges 24 17 31 26 20

Other Income 73 86 95 35 35

(% of PBT) 13.8 85.3 35.4 9.0 5.4

% chg (36.7) (81.0) 167.1 45.7 67.0

Extraordinary Expense/(Inc.) 0 0 0 0 0

Tax 173 37 83 127 212

(% of PBT) 32.8 36.9 31.1 32.5 32.5

Add: Share of earnings of asso. - - - - -

Less: Minority interest (MI) - - - - -

Prior period items - - - - -

% chg (35.2) (82.2) 191.8 42.7 67.0

(% of Net Sales) 5.7 1.0 2.5 3.0 4.4

% chg (35.2) (82.2) 191.8 42.7 67.0

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August 9, 2012 9

Balance sheet

Equity Share Capital 42 42 42 42 42Preference Capital 0 0 0 0 0

Reserves & Surplus 2,381 2,381 2,492 2,705 3,046

Minority Interest 0 0 0 0 0

Total Loans 0 0 0 0 0

Deferred Tax Liability 0 0 0 0 0

Gross Block 879 998 1,462 1,662 1,887

Less: Acc. Depreciation 206 232 294 392 503

673 766 1,168 1,270 1,384

Capital Work-in-Progress 116 58 84 50 50

Goodwill - - - - -

17 17 51 51 51

Deferred Tax Asset 0 5 22 22 22

Cash 524 587 264 201 194

Loans & Advances 318 354 367 358 460

Inventories 729 698 926 1,011 1,077

Debtors 2,858 2,926 3,083 3,960 4,256

Others 320 361 321 480 549

Current liabilities 3,132 3,348 3,751 4,655 4,954

1,617 1,579 1,209 1,355 1,581

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August 9, 2012 10

Cash flow statement

Depreciation 49 52 80 98 111(Inc)/Dec in Working Capital (63) 102 47 (209) (234)

Less: Other income (73) (86) (95) (35) (35)

Direct taxes paid (173) (37) (83) (127) (212)

(Inc.)/Dec.in Fixed Assets (163) (104) (513) (166) (225)

(Inc.)/Dec. in Investments 44 0.1 (33.9) 0.0 0.0

Other income 73 86 95 35 35

Issue of Equity - - - - -

Inc./(Dec.) in loans (0) 0 0 0 0

Dividend Paid (Incl. Tax) (50) (50) (74) (50) (99)

Others 4 0.3

Inc./(Dec.) in Cash 176 63 (311) (63) (7)

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August 9, 2012 11

Key ratios

P/E (on FDEPS) 47.1 264.3 90.5 63.5 38.0P/CEPS 41.4 145.4 63.3 46.2 30.3

P/BV 6.9 6.9 6.6 6.1 5.4

Dividend yield (%) 0.3 0.3 0.4 0.3 0.5

EV/Sales 2.6 2.6 2.2 1.9 1.6

EV/EBITDA 30.7 192.3 57.9 34.3 22.0

EV / Total Assets 6.7 6.7 6.5 6.0 5.4

OB/Sales 1.4 1.3 1.4 1.3 1.2

EPS (Basic) 16.7 3.0 8.7 12.4 20.7

EPS (fully diluted) 16.7 3.0 8.7 12.4 20.7

Cash EPS 19.0 5.4 12.5 17.1 26.0

DPS 2.0 2.0 3.0 2.0 4.0

Book Value 113.7 114.4 119.6 129.7 145.7

EBIT margin 7.7 0.5 2.8 4.4 6.3

Tax retention ratio (%) 67.2 63.1 68.9 67.5 67.5

Asset turnover (x) 3.5 3.4 3.7 3.7 3.8

RoIC (Pre-tax) 26.6 1.7 10.1 16.2 23.8

RoIC (Post-tax) 17.9 1.1 7.0 10.9 16.1

Cost of Debt (Post Tax) - - 21.1 0.0 0.0

Leverage (x) (0.2) (0.2) (0.2) (0.1) (0.1)

Operating ROE 14.1 0.8 9.6 9.7 14.7

RoCE (Pre-tax) 21.2 1.3 8.3 14.6 22.0

Angel RoIC (Pre-tax) 28.7 1.8 10.5 16.6 24.3

RoE 15.7 2.6 7.5 10.1 15.2

Asset Turnover (Gross Block) (X) 7.6 6.7 6.0 5.6 5.6

Inventory / Sales (days) 40 41 40 40 38

Receivables (days) 171 168 149 147 150

Payables (days) 197 181 172 174 162WC cycle (ex-cash) (days) 62 61 48 44 46

Net debt to Equity (0.2) (0.2) (0.1) (0.1) (0.1)

Net debt to EBITDA (1.0) (7.2) (1.1) (0.5) (0.3)

Interest Coverage 19.9 1.8 6.6 14.5 31.7

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August 9 2012 12

Research Team Tel: 022 3935 7600 E-mail: [email protected] Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

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Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking orother advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important`Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement ABB India

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

abb-2qcy2012ru 10th aug

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