Reduce 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 ~Rs20.4bn (up 44% YoY) (YSL estimates ~Rs18.6bn) led by growth across segments where Electricals/Robotics/Industrial Automation/Motion business grew by 45%/?46%/39%/67% YoY.
* EBITDA was up 110% YoY at Rs2bn while margins came at 9.7% v/s 6.6% in 2QCY21 led by higher gross margins, better capacity utilization and operational efficiencies
* PBT grew 118% YoY to Rs2bn owing to stellar operating performance.
* PAT after continued operation came in at Rs1.5bn Vs Rs683mn in 2QCY21.
* Order Inflows came in healthy at Rs27.7bn, up 64% YoY. Order book stands comfortable at Rs59.9bn (0.7x TTM revenues)
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