Add ABB India Ltd For Target Rs.2,325 - Yes Securities
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Execution ramping up; strong order inflows
Our view
ABB India Ltd (ABB) reported a good set of quarterly performance, led by execution pickup across segments. Despite the prevailing scenario of input cost pressure, the company was able to expand its margins led by price hikes and a favourable product mix (higher share of exports and services). On the back of recovery in economic activity and uptick in private capex cycle,the company reported strong quarterly order inflows of Rs22.9bn (up 26% YoY) spread across verticals. As on 1QCY22 order book stands at ~Rs52.3bn (0.7x TTM revenue), providing revenue visibility for next few quarters. Going forward the company expects good traction from oil & gas, cement, steel, chemicals, etc. However, it expects near term headwinds from commodity inflation, supply chain disruption and geopolitical tensions.
We believe ABB’s strong business model, healthy global distribution network, diversified business portfolio and strong cash position (Rs27bn) would benefit the company, once economic activity starts picking up. The stock is currently trading at PE of 78x/67x CY23E/CY24E. We maintain our ADD rating with a TP of Rs2,325 valuing it at 70x FY24 EPS of Rs33.2.
Result Highlights
Sales came in at ~Rs19.5bn (up, 21% YoY) (YSL estimates ~Rs18.6bn) led by growth across segments where Electricals/Robotics/Industrial Automation/Motion business grew by 36%/35%/5%/13% YoY. EBITDA was up 81% YoY at Rs1.9bn where margins came at 9.5% v/s 6.4% in 1QCY21 led by better capacity utilization and operational efficiencies.
Adj PBT grew 53% YoY to Rs2bn owing to stellar operating performance. During 1QCY22, the company sold its turbocharger business (part of Process Automation segment) to a wholly owned subsidiary Turbocharging Industries and Services India Pvt Ltd for a consideration of Rs3.1bn reporting a net profit of Rs2.93bn.
Adjusting to this, PAT after continued operation came in at Rs1.5bn vs Rs1.5bn in 1QCY21.
Order Inflow came in healthy at Rs22.9bn, up 26% YoY. Order book stands comfortable at Rs52.3bn (0.7x TTM revenues).
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