Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

Maintain SELL on ABB India - Headwinds remain - HDFC Securities

Posted On: 2020-07-13 05:21:26


Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities.

ABB India (Annual Report Analysis): Headwinds remain

Key takeaways from ABB's CY20 AR are as follows: (1) The share of exports in the revenue has grown from 11% to 18% over CY17-19; (2) Switchgear/Electrical Control, Supply/Motors, and other machines delivered robust CY17-19 revenue CAGR of 14/19/34% and contributed 31/24/19% to CY19 revenue (cumulative revenue mix of 74%); (3) net cash status of Rs 16bn. With clients conserving capital and global growth outlook bleak, new capex/opex headwinds remain. ABB's performance is highly sensitive to demand outlook. A challenging 2QCY20 with slow ramp-up in revenue will limit further re-rating. We believe headwinds are not fully priced into current rich valuations (51.3x Mar-22E EPS). Maintain SELL with TP of Rs 755/sh.

Composition of product and business segments: while ABB's product segments can be broadly categorized into (1) Switchgear, (2) Motors & Generators, (3) Drives & Electronics, and (4) Services, its business segments are centered around solutions provided to customers: (1) Motion, (2) Robotics, (3) Electrification and (4) Industrial Automation (IA). Electrification and Motion constitute ~75% of revenue and bulk of the profitability. Robotics remains small, as of now, and IA is suffering from high under-absorption, apart from a few legacy lower margin infrastructure and power projects, due to sluggish rate of growth in investments in greenfield refinery, thermal power and petrochemical domain. Consolidation in the steel market and slowdown in the auto sector have impacted CAPEX additions and production.

Power Grids (PG) demerger and Solar inverter business sale: During the year, PG business was demerged to APPSIL and listed separately. PG offered HV products and solutions across the generation, T&D value chain apart from railways and EV charging. This was part of a global deal to sell the PG business to Hitachi. With this cyclical chunky project-based business now hived off, ABB is a pure-play product and value-add services-based entity with short cycle orders. Sale of Solar Inverters business (7-8% of revenues, thin margins, 50:50 domestic: exports) will also be margin accretive.

While exports continue to drive growth, prime focus to be on domestic markets: Exports contributed 18% to CY19 revenue (13/11% in CY18/17). ABB registered double-digit growth for the third year in exports, embarking on a journey of "Make in India for the World". With capacity expansion not being a constraint as land is available, focus is firstly on domestic business stabilization and profitability, bringing quality to international standards, and then going in for export-driven growth. So, exports would remain ~20% of revenue.

Key growth drivers: ABB stands to benefit from impetus given to railways electrification; MRTS construction is planned over 26 cities; gas & water distribution infra opportunities would emerge in the Smart Cities Mission (AMRUT). While capex remains elusive, increasing digitization across core industries like cement, metal/mining, marine, oil & gas, etc., and deeper tier-2/3 cities' penetration will lead the next leg of growth. Digitisation opportunities would emerge in process industries, pharma, F&B, and data centers.

Shares of ABB India Limited was last trading in BSE at Rs.912.45 as compared to the previous close of Rs. 917.1. The total number of shares traded during the day was 5677 in over 828 trades.

The stock hit an intraday high of Rs. 925.35 and intraday low of 910. The net turnover during the day was Rs. 5195170.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Auto Sales Numbers - July 2020 - Acuité Ratings & Research

Preview on RBI Monetary Policy - Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

Mahindra Logistics - Q1FY21 Result Update - ICICI Securities

RBI monetary policy - Views from Mr Mandar Pitale - Head, Treasury, SBM Bank India

Phoenix Mills - Q1FY21 Result Update - ICICI Securities

Alkem Laboratories - Gladiator Stocks - ICICI Securities

Ajanta Pharmaceuticals - Q1FY21 Result Update - ICICI Securities

Torrent Power - Quant Pick - ICICI Securities

Security & Intelligence Services - Q1FY21 Company Update - ICICI Securities

Torrent Pharmaceuticals - Q1FY21 Result Update - ICICI Securities

Covid Recovery Pulse - Average daily auto registrations, E-Way bill generation shows recovery signs - ICICI Securities

Bharti Airtel - Q1FY21 Result Update - ICICI Securities

Sagar Cement - Q1FY21 Result Update - ICICI Securities

Dabur India - Q1FY21 Result Update - ICICI Securities

Mastek Ltd - Q1FY21 Company Update - ICICI Securities

Dr Reddy's Laboratories - Q1FY21 Result Update - ICICI Securities

Kewal Kiran Clothing - Company Update - ICICI Securities

Maruti Suzuki India - Q1FY21 Result Update - ICICI Securities

State Bank of India - Collection efficiency trends allude to lower asset vulnerability - ICICI Securities

SRF Limited - Packaging film margin zooms - ICICI Securities

Karur Vysya Bank - Earnings improve, but concerns persist - ICICI Securities

Core Sector Output & Fiscal Deficit: Acuité Ratings & Research

Maintain ADD on Colgate Palmolive - Toothpaste returning to growth, beat in the margin - HDFC Securities

Pre-Monetary Policy View - Lakshmi Iyer, Chief Investment Officer - Debt & Head Products, Kotak Mahindra Asset Management Company

SBI - 1QFY21 - Angel Broking

State Bank of India - Q1FY21 Results - YES SECURITIES

Maintain BUY on CDSL - Market share gain impressive - HDFC Securities

REDUCE on RBL Bank - Near-term pain inevitable - HDFC Securities

Maintain BUY on Orient Cement - Healthy performance despite sharp volume decline - HDFC Securities

Pre-Monetary Policy View - Sudhakar Shanbhag, CIO, Kotak Mahindra Life Insurance Company Limited

Maintain BUY on Maruti Suzuki - Improving outlook - HDFC Securities

Maintain REDUCE on Dr. Reddy's Labs - Strong beat, positives in the price - HDFC Securities

Reliance Industries - 1QFY21 - Angel Broking

ADD on Interglobe Aviation - Delayed recovery - HDFC Securities

Views on Reliance Industries Q1FY21 Results: Mr. Deepak Jasani, Head Retail Research, HDFC Securities

HDFC Ltd - 1QFY21 - Angel Broking

Bharti Airtel - 1QFY21 - Angel Broking

Loan Moratorium & Impact on Banks & NBFCs - Acuité Ratings & Research

Maintain REDUCE on Hexaware Technologies - Protracted recovery path - HDFC Securities

ADD on IndusInd Bank - Equity raise an additional positive - HDFC Securities

Maintain ADD on Multi Commodity Exchange - Strong recovery in volume - HDFC Securities

Maintain REDUCE on Nestle India - Muted 2Q; hit by supply disruptions - HDFC Securities

Maintain BUY on Tech Mahindra - Recovery on the cards - HDFC Securities

Maintain BUY on UltraTech Cement - Well rounded performance! - HDFC Securities

Maintain ADD on United Spirits - Weak show; gradual recovery expected - HDFC Securities

Greenlam Industries - Exports continue to drive outperformance - ICICI Securities

InterGlobe Aviation - No qualms on survival is the investment thesis - ICICI Securities

Thermax - Tempered by global macro challenges - ICICI Securities

Kewal Kiran Clothing - Strong balance sheet to cushion downside - ICICI Securities

CEAT - Tight cost control supports performance - ICICI Securities







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019