* ABB has received an order of INR43.5b from PGCIL to set up a transmission link between Raigarh and Pugular with 800KV HVDC systems.
* ABB continues to focus on increased localization and cost optimization. Its direct RM costs have declined to 64.5% of revenue from a peak of 81% in 4QCY10, well below its internal target of 65%. This has aided margins, despite negative operating leverage.
* We expect revenue to grow 10% YoY led by execution ramp-up in the project segment. Operating margin is likely to decline 180bp YoY to 9.7%. Net profit should grow 28% YoY to INR1.01b.
* Maintain Neutral.
Key issues to watch
* Management commentary suggests cautious optimism. Continued focus on exports and services to be an important driver of projected strong double-digit revenue and profit growth.
* Continued preference for cash generation vis-à-vis profits.
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