Published on 20/04/2017 3:31:43 PM | Source: Motilal Oswal Securities Ltd

Neutral On ABB Ltd For Target Rs.1,190.00 - Motilal Oswal

Posted in Broking Firm Views - Long Term Report| #ABB India Ltd. #Power Sector #Broking Firm Views Report #Motilal Oswal

* 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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