ABB India ......Thread
RAJESH DESAI
RAJESH DESAI
ABB is tweaking its products, systems and services to make sustainability an integral part of its business model, much like a Unilever or a GE.
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CA. Rajesh Desai
RAJESH DESAI
ABB said its board of directors has approved the scheme of amalgamation of the company's wholly owned subsidiary viz. Baldor Electric India (Baldor) with the company. ABB said in a statement that it will benefit in terms of operational efficiencies and cost synergies consequent to this amalgamation.
ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact.
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CA. Rajesh Desai
Rajesh Desai
ABB's operational earnings before interest and tax (EBIT) excluding depreciation and amortization adjusted for unrealized gains and losses on derivatives, adjusted for realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, adjusted for unrealized foreign exchange movements on receivables/payables, adjusted for restructuring and restructuring-related expenses, and adjusted for acquisition-related expenses and certain non-provisional items, declined 19.85% to Rs 109 crore in Q4 December 2012 over Q4 December 2011.
ABB's net profit fell 25.94% to Rs 137 crore on 1.35% increase in revenue to Rs 7470 crore in the year ended 31 December 2012 (FY 2012) over the year ended 31 December 2011 (FY 2011). The operational earnings before interest and tax (EBIT) excluding depreciation and amortization adjusted for unrealized gains and losses on derivatives, adjusted for realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, adjusted for unrealized foreign exchange movements on receivables/payables, adjusted for restructuring and restructuring-related expenses, and adjusted for acquisition-related expenses and certain non-provisional items, declined 7.45% to Rs 385 crore in FY 2012 over FY 2011.
The company said while its product businesses performed well while service and exports grew significantly in FY 2012. However, the project businesses were affected by poor market conditions, tight liquidity and other external factors.
The company further increased its efforts to improve operational efficiencies, consolidate supplier base and increase productivity. As part of its strategy to expand global footprint, the company continued to invest in manufacturing and improve competitiveness in domestic as well as export markets. These include both new investments and upgradation of existing facilities, ABB said.
The company's products businesses delivered improved profitability in FY 2012. However, project businesses faced several challenges due to anticipated cost overrun mainly caused by project delays on account of external factors. Delays in receipt of payments due to tight liquidity in the market, inflexible terms and conditions in infrastructure projects, forex volatility and lower price realization increased the risk level significantly and impacted project margins in FY 2012, ABB said.
ABB said it received orders worth Rs 6966 crore in FY 2012, which was lower than order intake of Rs 8189 crore in FY 2011. To overcome the challenges arising out of weak investments in traditional markets, the company leveraged new business streams such as solar, data centers and energy efficiency solutions, ABB said in a statement. As part of its strategic thrust to enhance service business, the company tapped into its large installed base in traditional sectors which yielded positive results, ABB said. Good implementation of the export strategy over the quarters resulted in double digit growth with increased geographical reach, ABB said. The company decided to reposition its power systems business for higher profitability by adopting a business model in line with the global strategy of having higher ABB content in projects with appropriate risk return profile, ABB said.
ABB said that the company is well positioned with a significant order backlog of Rs 8672 crore as on 31 December 2012, providing the necessary visibility to future revenues.
Commenting on the financial performance, Bazmi Husain, Managing Director, ABB said: "While short term economic uncertainties cannot be ruled out, the company is cautiously optimistic about the long term potential of the Indian market. We look forward to the government's reform initiatives to accelerate and revive the capital goods sector. We continue to take several initiatives to introduce new technology and products that help Indian utility and industry customers remain competitive. We are also intensifying our efforts to boost productivity, strengthen project management and optimize resource utilization for sustained profitable growth".
ABB is a leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 145,000 people.
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CA. Rajesh Desai
Rajesh Desai
4QCY12 results review
ABB Limited - No margin recovery in sight yet!
ABB reported below expectation 4QCY12 performance, largely due to lower revenues and continued margin pressure. Decline in revenues is on account of the company holding back shipment of clients where there exists uncertainty on the collections front. Order inflow declined by 28.5% YoY to INR15.8bn. Though company is working on improving operational excellence by focusing 3P (People + Productivity + Products), the adjusted EBITDA margin of 1.8% in 4QCY12 was 260bps lower than estimated 4.3%. The company is focusing on cashflows and profitability and considering weak market scenario; revenue growth is expected to remain lower. Even after factoring in a significant turnaround in performance going ahead, which we believe would be difficult considering no large orders in market, valuations are rich with the stock trading at a P/E of 33.7x its CY13e earnings. Maintain SELL.
Results highlights
Revenues decline by 5.4% YoY
ABB reported better than expected net sales at INR20.5bn (estimate of INR19bn), a YoY decline of 5.4%. However, revenue growth stood at 14.9% QoQ. Revenues in system segment were impacted with delay in project execution due to weaker market. Power system and Discrete automation and motion reported revenue decline of 18.1% YoY to INR6bn and of 6% YoY to INR4.9bn, respectively, in 4QCY12. However, low voltage products segment rose by 16% YoY to INR1.7bn.
Cost control failed to improve margins
EBITDA declined 28.9% YoY (QoQ drop of 15.4%) to INR371m, as margins dropped from 2.3% in 4QCY11 to 1.8% in 4QCY12. Margin pressure was due to project delays and the accounting policy to take all anticipated increase in project costs due to slow progress in some large infrastructure and industrial projects. Forex gain during the quarter stood at INR75m against a gain of INR260m in 4QCY11. PBT declined by 69% to INR263m as compared to our estimate of INR719m.
Order inflow declined by 28.5% YoY, outlook remains challenging
The company reported 28.5% de-growth in order inflow to INR15.8bn during 4QCY12 compared to order intake of INR22.1bn in 4QCY11 as delay in finalization of large orders resulted in an overall order decrease in orders. The order book declined by 5% from INR91.2bn in 4QCY11 to INR86.7bn in 4QCY12.
Valuation and outlook
At the CMP of INR584, the stock is trading at 90x CY12 and 33.7x CY13e EPS and P/BV of 4.2x CY13e. We expect earnings to increase by 167% to INR3.7bn in CY13e. We have valued the company at 30x CY13e with target price of INR519. We maintain our SELL recommendation considering expensive valuation.
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CA. Rajesh Desai
Rajesh Desai
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ABB (Insti)- NB |
· ABB posted 4QCY12 revenue of Rs20.8bn, down 5.3% YoY and 11% below our and Bloomberg consensus estimates each. · Higher provision for project costs (Rs600mn) and lower revenue traction due to delay in execution of large projects led to a 19.1% YoY fall in EBITDA at Rs666mn. · We have retained our Sell rating on the stock with a revised target price of Rs492 |
CA. Rajesh Desai