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ABB: Taking stock - Views on News from Equitymaster
 
 
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  • Jan 3, 2001

    ABB: Taking stock

    Asea Brown Boveri, the power transmission and distribution (T&D) equipment major is all set to declare its financial year December ending FY01 results in the next fortnight. This seems a good time to take stock of the company’s past performance, its future outlook and valuations.

    Asea Brown Boveri (ABB) India is one of the foremost suppliers of high-end power transmission and distribution (T&D) equipment in India. The Rs 7.8 billion (US$ 170 million) ABB India manufactures motors, generators and alternators upto 200 megawatt (MW). It commands a 19 percent share of the Rs 14 billion (US$ 305 million) high tension (HT) switchgear segment. It also manufactures control systems and mini/micro processor-based systems.

    (Rs m) 9m FY00 9m FY01 Change
    Sales 5,161 5,072 -1.7%
    Other Income 70 87 24.9%
    Expenditure 5,111 4,680 -8.4%
    Operating Profit (EBDIT) 50 393 686.1%
    Operating Profit Margin (%) 1.0% 7.7%  
    Interest 44 32 -28.6%
    Depreciation 120 129 7.2%
    Profit before Tax 167 319 91.1%
    Tax 43 70 62.8%
    Profit after Tax/(Loss) 124 249 100.9%
    Net profit margin (%) 2.4% 4.9%  
    No. of Shares (eoy) (m) 41.4 41.4  
    Earnings per share* 4.0 8.0  
    *(annualised)      
    Current P/e ratio   33.0  

    The company recorded a superlative performance in 3QFY01. It’s revenues jumped 28% over the corresponding quarter in 1999. The bottomline grew by a significant 283% to Rs 134 m. The jump in net profits was not only because of the jump in revenues but also because of lower voluntary retirement expenses (VRS), a part of the previous year's restructuring exercise. On a consolidated nine-month basis, the company’s bottomline doubled to Rs 249 m. During the third quarter, the company received orders worth Rs 350 m from National Thermal Power Corporation (NTPC) and Bhakra Beas Management Board.

    As a result, the company’s stock ran up by 29% from October 2000 to Rs 265 currently. Thus the stock now trades at a P/e multiple of 33 times its annualised nine month FY01 results. Infact, the stock is quoting near its 52–week high of Rs 308. The current P/e valuations of the company are in line with its earning expectations and the sector outlook. It is unlikely that from these levels the ABB stock will see much upside until unless the sector itself sees a major re-rating.

     

     

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