ABB India Ltd. share price target

Industrial Automation facing headwinds due to higher exposure to slowing Automotive sector and limited capex from private sector. ABB India reported flat revenue growth YoY driven by Robotics & Motion and Electrification business. Industrial Automation business was impacted due...

20 December 2019 the record date for the demerger of the Power Grid business was set as 23 Dec 2019, the stock now trades without the value of the same effective today. For 9MCY19, the Power Grid business reported PAT of INR1.4b (-23% YoY). This is 38% of the reported PAT for the company. Our prior SOTP based valuation ascribed INR276/sh to the Power Grid business at Sep21E PE multiple of 25x. the demerger of Power Grid business, ABB Indias business is largely products & services oriented with projects forming 7-8% of revenue. After coming in at 13% over CY15-18, residual business revenue CAGR is estimated at 14% over CY18-21. high component of products & services, the residual business will be short cycle in nature. Thus, order inflows may be volatile over the near term, especially given ups and downs of the economic cycle.

ABB is well placed to benefit from capex led economic expansion. Government initiative on tax reduction augurs well over long term for developing India into a global manufacturing hub. India enjoys both domestic demand and labour arbitrage vs. global supply chain. Manufacturing shifts take time and near term weak economic outlook poses re-rating headwinds. We recommend NEU on ABB. Key risks (1) Delays in Government capex recovery, (2) Slowdown in private investments, (3) INR depreciation, and (4) Any adverse corporate action. We recommend NEU on ABB India Ltd. (ABB) with SOTP based TP of Rs 1,534/sh (42x ABB, 30x Power Grids discontinued business). Whilst ABB is well placed to cater to Automation/Motion/Electrical segments, demand headwinds and punchy valuation limits further re-rating. Strong balance sheet, Automation Products/Solutions expertise and cross cycles experience limits downside.

ABB India manufactures heavy engineering & industrial equipments and undertakes engineering and construction projects. The company operates mainly through the Robotics & Motion, Electrification products and...

Below estimated performance in continued business: Revenue increased 4% YoY to INR17.3b in 2QCY19 (below our est. of INR18.5b). EBITDA grew 42% YoY to INR1.2b (below our est. of INR1.5b), while recurring PAT rose 59% YoY to INR697m (below our est. of INR0.9b). ABB has entered into an agreement with Hitachi globally to sell its power grid' business; as a result, it is showing power grid' as a discontinued business. During the quarter, revenue from the discontinued business increased 2% YoY to INR11b; EBIT was up 3% YoY to INR1b with margin at 9.4%....

We have reduced our consol earnings estimates by 6.3%/2.3% for CY19/20E factoring lower than expected margin in Industrial Automation & Power Grid(PG) business and slowdown in automotive sector. 2QCY19 numbers of ABB India were lower than our and street estimations, largely on the back of lower than expected revenue growth in Robotics & Motion and Industrial Automation. Management indicated sluggish offtake due to elections, weak macros being the key reasons for lower revenue growth. However, strong traction in exports partially neutralized the slowdown in the domestic market....

business, as it has entered into an agreement with Hitachi at the global level to sell this business. During the quarter, discontinued business revenue declined 6% YoY to INR908m and EBIT was down 45% YoY to INR0.5b with the margin contracting 380bp YoY to 5.5%. Margins supported by better revenue mix, operating leverage: The operating margin improved 220bp YoY to 7.9% in the quarter, supported by a better revenue mix, improved capacity utilization and operating leverage. The EBIT margin shrank for both industrial automation (-290bp to 10.1%)...

We are downgrading ABB India from Hold to Reduce given high valuations Change in Estimates | Target | Reco post recent run up (~19% in last three months) in stock price. ABB Ltd's (ABB's) CY18 annual report indicates that digitalization, automation and...

1 March 2019 Revenue increased 15% YoY to INR19.7b in 4QCY18. EBITDA grew 48% YoY to INR2.2b, while PAT increased 58% YoY to INR1.3b. For CY18, sales/EBIDTA/PAT from the continued business grew 6%/10%/13%. We note that ABB has shown power grid as a discontinued business as it has entered into an agreement with Hitachi at global level to sell this business. During the quarter, discontinued business revenue grew 6% YoY to INR11.6b, while EBIT/PAT declined 2.4%/22% YoY to INR1.1b/INR0.7b. Continued business gross margin expanded by 210bp YoY to 32.6% and operating margin by 250bp YoY to 11.0%, driven by (a) operating leverage on better execution, (b) improved revenue mix and (c) strong control over RM cost.

Zurich, Switzerland-based ABB Group will be selling its Global Power Grid business to Japan-based Hitachi at an enterprise value (EV) of ~USD11bn. The deal has been valued at an EV/EBITA of 11.2x. Press releases suggest that ABB Group plans to return cash proceeds of USD7.6-7.8bn from the transaction to shareholders through a share buyback, or a special dividend. We believe that the T&D; business has morphed into a mere converter of Raw Materials into Finished Goods from being a technology-driven business earlier. Given the intense competition and high dependence on a single group of buyers, i.e., Power Utilities, the...