abb india result updated

7/31/2019 ABB India Result Updated

1/13

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

(` cr) 1QCY12 1QCY11 % chg (yoy) 4QCY11 % chg (qoq)Revenue 1,790 1,793 (0.2) 2,200 (18.6)EBITDA 97 102 (4.0) 108 (9.7)

EBITDA margin (%) 5.4 5.7 (22)bp 4.9 54bp

Reported PAT 48 60 (20.0) 64 (25.7)Source: Company, Angel Research

ABB India (ABB) reported a mixed set of numbers for 1QCY2012. The company

reported lower-than-expected top-line as well as bottomline performance;

however, when adjusted for MTM forex loss, the bottom line exceededexpectations. Order intake during the quarter was down 3.7% at `1,632cr, taking

the total order book to `9,028cr. We expect order inflow to improve over the

coming quarters, which will lead to 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 do not warrant

a change in our view. Hence, we continue to maintain our Sell view on the stock.Revenue flat, margin improves when adjusted for forex loss: For 1QCY2012, thecompanys top line was flat at `1,790cr (`1,793cr), which was 12.8% lower than

our (as well as consensus) estimate of `2,053cr. EBITDA margin declined by 22bp

yoy to 5.4%, lower than our estimate of 5.9%; however, when adjusted for forex

loss, EBITDA margin came in higher at 7.3%. Reported PAT came in at `47.6cr,

declining by 20% yoy. Margin improvement was primarily on the back of

reduction in cost of materials, which was on account of certain cost-saving

measures, which the company started taking five quarters back.

Outlook and valuation: With decent order inflows expected in the power productsand power system segments along with recovering profitability, exit from rural

electrification projects and debt-free balance sheet, we expect ABBs fundamental

to steadily improve going forward. However, with ABB trading at 41x and 36x PE

on CY2012 and CY2013 EPS estimates, we believe the stock remains overvalued.

We maintain our Sell view on the stock with a target price of `498.Key financialsY/E December (` cr) CY2010 CY2011 CY2012E CY2013ENet sales 6,287 7,370 8,760 10,023% chg 0.8 17.2 18.9 14.4

Net profit 63 185 386 440% chg (82.2) 191.8 109.3 13.8

EBITDA (%) 1.3 3.8 7.6 7.5

EPS (`) 3.0 8.7 18.2 20.7P/E (x) 250.3 85.8 41.0 36.0

P/BV (x) 6.5 6.2 5.5 4.9

RoE (%) 2.6 7.5 14.4 14.6RoCE (%) 1.3 8.3 21.0 21.1

EV/Sales (x) 2.4 2.1 1.8 1.5

EV/EBITDA (x) 181.8 54.8 23.4 20.7

Source: Company, Angel Research

SELLCMP `747

Target Price `498

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 75.0

MF / Banks / Indian Fls 13.4

FII / NRIs / OCBs 3.2

Indian Public / Others 8.4

Abs. (%) 3m 1yr 3yr

Sensex (7.6) (11.0) 38.8

ABB (14.0) (15.9) 60.5

Face Value (`)

BSE Sensex

Nifty

Reuters Code

15,827

0.7

915/541

368,360

Capital Goods

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

ABB@IN

2

16,479

4,965

ABB.BO

Rahul Kaul+91 22 3937 7600 Ext: 6817

[email protected]

ABB IndiaPerformance Highlights

1QCY2012 Result Update | Capital Goods

May 10, 2012


2/13

ABB India | 1QCY2012 Result Update

May 10, 2012 2

Exhibit 1:Quarterly performance

1QCY12 1QCY11 % chg (yoy) 4QCY11 % chg (qoq) CY2011 CY2010 % chg (qoq)Net Sales 1,773 1,781 (0.5) 2,170 (18.3) 7,370 6,287 17.2

Other operating income 17 12 30 79 72Total income 1,790 1,793 (0.2) 2,200 (18.6) 7,449 6,359 17.1Stock adjustments (8) (17) 20

(85) (10)

Raw Material 1216 1294 (6.0) 1515 (19.7) 5,563 4,812 15.6

(% of total income) 71.2 75.6 74.3

73.5 75.5

Employee Cost 149 125 18.9 155 (3.7) 587 490 19.7

(% of total income) 8.3 7.0 7.0

7.9 7.7

Other Expenses 267 213 25.2 302 (11.7) 1022 911 12.1

(% of total income) 14.9 11.9 13.7

18.4 18.9

Total Expenditure 1,693 1,691 0.1 2,092 (19.1) 7,087 6,203 14.2EBITDA 98 102 (4.0) 108 (9.7) 362 156 131.9(EBITDA %) 5.4 5.7 4.9

4.9 2.5

Interest 5 4 35.1 13 (58.2) 31 17 76.4

Depreciation 22 14 55.0 12 79.5 80 52 54.0

Other Income 2 5 1

16 13

PBT 72 88 (18.4) 84 (14.7) 268 100 167.1PBT (%) 5.5 4.9 3.8

3.6 1.6

Total Tax 24 28 (14.9) 20 20.6 83 37 124.9

(% of PBT) 33.5 32.1 23.7

31.1 36.9

Reported PAT 48 60 (20.0) 64 (25.7) 185 63 191.8PAT Margins(%) 2.7 3.3 2.9

2.5 1.0 -

EPS (`) 2.2 2.8 (20.0) 3.0 (25.7) 8.7 3.0 192.3


Exhibit 2:Actual vs. estimates

(` cr) Actual Estimates Var (%)Revenue 1,790 2,053 (12.8)EBITDA 97 121 (19.5)

Interest 5 10 (47.8)

Tax 24 33 (27.7)

PAT 47 68 (30.9)Source: Company, Angel Research


3/13


4/13


May 10, 2012 4

Exhibit 5:Power systems: Flat for the quarter


Exhibit 6:Power products: Growth at modest 4.1% yoy


Exhibit 7:Process automation continues to dip


Exhibit 8:Discrete automation remains flat


Margin declines slightly: EBIT margin for the quarter came in at 4.2%, down from4.9% yoy and below our estimate of 5.2%. Power systems witnessed a sharp revival

in profitability with profit margin at 5.0%, up from 0.3% yoy. However, power

products, process automation and discrete automation saw declining margins for

the quarter. Adjusting for notional forex loss of `33cr, EBIT margin actually came

in at 6%. Reported PAT margin declined to 2.7% in 1QCY2012 from 3.3% in

1QCY2011.

(43.2)

(12.7)(12.8)(25.4)

(43.2)

(14.5)(10.1)

2.8

48.949.6

21.7

39.4

15.2

(0.6)

(60.0)

(40.0)

(20.0)

0.0

20.0

40.0

60.0

0

160

320

480

640

800

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

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

(20.0)

(10.0)

0.0

10.0

20.0

30.0

0

160

320

480

640

800

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

Power Products Growth (yoy %, RHS)

62.0

(14.9)

10.0

(2.9)(12.7)

14.0

(27.8)

(9.2)

3.615.1

30.127.5

(7.1)(7.9)

(40.0)

(20.0)

0.0

20.0

40.0

60.0

80.0

0

160

320

480

640

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

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)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

0

160

320

480

640

3QCY08

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

Automation products Growth (yoy %, RHS)


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May 10, 2012 5

Exhibit 9:EBIT margin on a recovery path


(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

3QCY10

4QCY10

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

(%)

Power Systems Power Products Process Automation Automation products Others/Low Voltage Products


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May 10, 2012 6

Order flow surprised negatively: Order intake during the quarter declined by 3.7%yoy to `1,632cr, with order backlog standing at `9,028cr for 1QFY2012.

Management highlighted that both power products and power systems witnessed

double-digit growth; however, the process automation segment, which largelysources orders from the industry witnessed a decline in order flows. Management

attributed the decline in order inflows from industries to overcapacity and high cost

of capital.

Exhibit 10:Order inflow trend


Exhibit 11:Order backlogtrend


Key highlights of the conference call Management stated that though India remains a highly competitive market,

prices have begun to stabilize. During the quarter, the company also launched

new products such as dry type distribution transformers and GIS switchgears.

Management expects long-term margin to be at 8-10%.

Rural electrification orders now stand at just `25cr.

(60)

(40)

(20)

0

20

40

60

80

100

0

500

1,000

1,500

2,000

2,500

3,000

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

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

(10)

(5)

0

510

15

20

25

30

35

40

45

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

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


7/13


May 10, 2012 7

Outlook and valuation: With decent order inflows expected in the power productsand power system segments along with recovery in profitability due to supply chain

initiatives, exit from rural electrification projects and a debt-free balance sheet,

we expect ABBs fundamentals to steadily improve going forward. However, withthe stock trading at 41x and 36x PE on CY2012E and CY2013E EPS estimates, we

believe it remains overvalued. Hence, we maintain our Sell view on the stock with atarget price of `498.Change in estimates:We slightly reduce our revenue estimates by 1.8% and 1.9%for CY2012E and CY2013E, respectively, as we lower our order inflow and

execution expectations. However,we largely maintain our margin expectations forboth CY2012E and CY2013E earnings estimates.

Exhibit 12:Change in estimates

CY2012E CY2013EEarlier estimates Revised estimates Var. Earlier estimates Revised estimates Var.

Revenue 8,926 8,760 (1.8) 10,220 10,023 (1.9)

EBITDA 683 662 (3.1) 762 748 (1.9)

PAT 395 386 (2.2) 444 440 (1.0)

Source: Company

Exhibit 13:Angel EPS forecast

EPS Angel Bloomberg Var.CY2012E 18.2 15.6 17.0

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-0

7

Sep-0

7

Apr-08

Nov-0

8

Jun-0

9

Jan-1

0

Aug-1

0

Mar-11

Oct-11

May-1

2

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


8/13


May 10, 2012 8

Exhibit 15:Peer comparison

Company Reco. CMP Tgt. price Upside/ P/BV(x) P/E(x) FY2011-13E RoCE (%) RoE (%)(`) (`) (Downside) (%) FY13E FY14E FY13E FY14E EPS CAGR FY13E FY14E FY13E FY14E

ABB* Sell 747 498 (33.4) 5.5 4.9 41.0 36.0 54.3 21.0 21.1 14.4 14.6BHEL Neutral 216 - - 1.8 1.6 9.2 9.0 (6.3) 26.7 24.0 21.3 18.9

BGR Energy Neutral 303 - - 1.8 1.6 11.2 10.0 1.4 10.1 9.9 17.3 17.4

Crompton Greaves Buy 121 164 35.6 1.9 1.7 11.2 10.3 33.4 19.5 20.2 18.4 17.3

Jyoti Structures Buy 39 67 71.6 0.4 0.4 3.6 2.9 5.9 18.2 19.6 12.7 13.9

KEC International Buy 51 73.136 42.4 0.9 0.8 4.9 4.2 2.5 21.5 21.1 25.9 24.0

Thermax Neutral 426 - 0.8 2.7 2.4 14.0 14.9 (9.9) 24.3 20.5 20.5 16.9

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


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May 10, 2012 9

Profit and loss statement

Y/E December (` cr) CY2009 CY2010 CY2011 CY2012E CY2013EOperating income 6,237 6,287 7,370 8,760 10,023% chg (8.8) 0.8 17.2 18.9 14.4Total Expenditure 5,710 6,203 7,087 8,098 9,275Raw Materials 1,823 2,577 2,717 2,956 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

EBITDA 527 84 283 662 748% chg (31.5) (84.1) 238.0 133.7 13.0

(% of Net Sales) 8.5 1.3 3.8 7.6 7.5

Depreciation & Amortisation 49 52 80 98 111

EBIT 479 32 204 564 636% chg (34.7) (93.3) 534.1 176.9 12.9

(% of Net Sales) 7.7 0.5 2.8 6.4 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 6.1 5.4

Recurring PBT 527 100 268 572 651% chg (36.7) (81.0) 167.1 113.7 13.8

Extraordinary Expense/(Inc.) - - - - -

PBT (reported) 527 100 268 572 651Tax 173 37 83 186 212

(% of PBT) 32.8 36.9 31.1 32.5 32.5

PAT (reported) 355 63 185 386 440Add: Share of earnings of associate - - - - -

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

Prior period items - - - - -

PAT after MI (reported) 355 63 185 386 440ADJ. PAT 355 63 185 386 440% chg (35.2) (82.2) 191.8 109.3 13.8

(% of Net Sales) 5.7 1.0 2.5 4.4 4.4

Basic EPS (`) 16.7 3.0 8.7 18.2 20.7Fully Diluted EPS ( ) 16.7 3.0 8.7 18.2 20.7% chg (35.2) (82.2) 191.8 109.3 13.8


10/13


May 10, 2012 10

Balance sheet

Y/E December (` cr) CY2009 CY2010 CY2011 CY2012E CY2013ESOURCES OF FUNDSEquity Share Capital 42 42 42 42 42Preference Capital - - - - -

Reserves & Surplus 2,381 2,381 2,492 2,828 3,169

Shareholders Funds 2,424 2,424 2,535 2,871 3,212Minority Interest - - - - -

Total Loans - - - - -

Deferred Tax Liability - - - - -

Total Liabilities 2,424 2,424 2,535 2,871 3,212APPLICATION OF FUNDSGross Block 879 998 1,462 1,662 1,887

Less: Acc. Depreciation 206 232 294 392 503

Net Block 673 766 1,168 1,270 1,384Capital Work-in-Progress 116 58 84 50 50

Goodwill - - - - -

Investments 17 17 51 51 51Deferred Tax Asset 0 5 22 22 22

Current Assets 4,749 4,926 4,960 6,126 6,668Cash 524 587 264 309 326

Loans & Advances 318 354 367 402 460

Inventories 729 698 926 975 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 4,649 4,964

Net Current Assets 1,617 1,579 1,209 1,478 1,704Total Assets 2,424 2,424 2,535 2,871 3,212


11/13


May 10, 2012 11

Cash flow statement

Y/E December (` cr) CY2009 CY2010 CY2011 CY2012E CY2013EProfit before tax 527 100 268 572 651Depreciation 49 52 80 98 111(Inc)/Dec in Working Capital (63) 102 47 (224) (210)

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

Direct taxes paid (173) (37) (83) (186) (212)

Cash Flow from Operations 268 131 216 226 306(Inc.)/Dec.in Fixed Assets (163) (104) (513) (166) (225)

(Inc.)/Dec. in Investments 44 0 (33) 0 0

Other income 73 86 95 35 35

Cash Flow from Investing (46) (19) (452) (131) (190)Issue of Equity - - - - -

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

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

Others 4 0 0 0 0

Cash Flow from Financing (50) (50) (74) (50) (99)Inc./(Dec.) in Cash 176 63 (311) 45 17

Opening Cash balances 348 524 587 276 321Closing Cash balances 524 587 276 321 338


12/13


May 10, 2012 12

Key ratios

Y/E December CY2009 CY2010 CY2011 CY2012E CY2013EValuation Ratio (x)P/E (on FDEPS) 44.6 250.3 85.8 41.0 36.0P/CEPS 39.3 137.8 59.9 32.7 28.7

P/BV 6.6 6.5 6.2 5.5 4.9

Dividend yield (%) 0.3 0.3 0.4 0.3 0.5

EV/Sales 2.5 2.4 2.1 1.8 1.5

EV/EBITDA 29.0 181.8 54.8 23.4 20.7

EV / Total Assets 6.3 6.3 6.2 5.4 4.8

OB/Sales 1.4 1.3 1.4 1.3 1.2

Per Share Data (`)EPS (Basic) 16.7 3.0 8.7 18.2 20.7

EPS (fully diluted) 16.7 3.0 8.7 18.2 20.7

Cash EPS 19.0 5.4 12.5 22.9 26.0

DPS 2.0 2.0 3.0 2.0 4.0

Book Value 113.7 114.4 119.6 135.5 151.5

DuPont Analysis (%)EBIT margin 7.7 0.5 2.8 6.4 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 3.7

RoIC (Pre-tax) 26.6 1.7 10.1 23.8 23.8

RoIC (Post-tax) 17.9 1.1 7.0 16.1 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 14.1 14.1

Returns (%)RoCE (Pre-tax) 21.2 1.3 8.3 21.0 21.1

Angel RoIC (Pre-tax) 28.7 1.8 10.5 24.5 24.3

RoE 15.7 2.6 7.5 14.4 14.6

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

Inventory / Sales (days) 40 41 40 40 37

Receivables (days) 171 168 149 147 150

Payables (days) 197 181 172 176 161WC cycle (ex-cash) (days) 62 61 48 44 46

Solvency ratios (x)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) (0.5)

Interest Coverage 19.9 1.8 6.6 21.4 31.7


13/13


M 10 2012 13

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

DISCLAIMERThis 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,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other 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

the past.

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.

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

abb india result updated

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