ABB India Ltd. share price target

ABB India has delivered a subdued performance in 4QCY19 with revenue declining by 1% YoY to Rs19.5bn owing to 20% lower revenue in industrial automation and significant decline in other segments. Revenue from Electrification and Motion segment grew by 11% and 7%, respectively. EBITDA margin fell by 390bps YoY to 7.1%, while EBITDA declined by 36% YoY to Rs1.4bn impacted by lower margin across segments. Adjusted PAT declined by 45% YoY to Rs1.1bn due to poor operating performance, while reported PAT declined by 81% YoY to Rs387mn, as the company has provided Rs697mn towards remeasurement of fixed assets and inventory for sale of solar inverter business. Order inflow declined by 16% YoY to Rs16bn in 4QCY19. The current order...

ABB India has delivered a subdued performance in 4QCY19 with revenue declining by 1% YoY to Rs19.5bn owing to 20% lower revenue in industrial automation and significant decline in other segments. Revenue from Electrification and Motion segment grew by 11% and 7%, respectively. EBITDA margin fell by 390bps YoY to 7.1%, while EBITDA declined by 36% YoY to Rs1.4bn impacted by lower margin across segments. Adjusted PAT declined by 45% YoY to Rs1.1bn due to poor operating performance, while reported PAT declined by 81% YoY to Rs387mn, as the company has provided Rs697mn towards remeasurement of fixed assets and inventory for sale of solar inverter business. Order inflow declined by 16% YoY to Rs16bn in 4QCY19. The current order...

ABB has levers in place to mitigate slow uptick in capex. One offs/legacy project margin hit has been a disappointment and continues to restrict margin expansion. Export growth is panning out well and mitigating domestic weakness. Balance sheet has net cash Rs 19.5bn to fund growth as an when recovery pans out. We believe rich valuation price in these tailwinds and multiple re-rating is contingent on capex recovery. We maintain NEU on ABB. Key risks (1) Delays in Government capex recovery, (2) Slowdown in private investments, and (3) INR depreciation. We maintain NEU on ABB India Ltd. (ABB) with a TP of Rs 1,219/sh (42x ABB continuing business). Whilst ABB is navigating through weak economic undercurrent and holding onto growth, capex recovery will take time to pan out. Strong balance sheet, Automation Products/Solutions expertise and cross cycles experience limits downside.

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%)...