Asea Brown Boveri (ABB) India, has declared an encouraging 36% growth in turnover during 1QFY02. This has brought about a huge growth in its bottomline to Rs 47 m. The performance is in keeping with the company's turnaround in FY01 post the spin off of its power business to ABB Alstom.
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ABB is one of the foremost suppliers of high-end power transmission and distribution (T&D) equipment in India. The Rs 7.9 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.
Large infrastructure orders from customers such as WBSEB, MSEB, APTRANSCO, NTPC Talcher and Delhi Metro Rail Corporation resulted in the company clocking a significant 52% jump in order intake to Rs 11 bn during FY01. This is probably the reason that ABB's turnover showed such an improved growth. In the last quarter (i.e. 4QFY01) turnover grew by about 10%. Therefore the turnover growth this quarter is encouraging.
However, ABB's order intake declined to Rs 2,251 m during the quarter, as compared to an order intake of Rs 3,521 m in 1QFY01. However, it must be noted that the company received a large order from West Bengal State Electricity Board (WBSEB) worth approx. Rs 1,320 m last year. If we exclude this then the company had maintained its order intake this quarter.
ABB has been focusing on seamless solutions for its clients and is working towards providing real time services. The company's T&D business is also on an upswing. This focus is likely to improve its operating margins in the next few years.
At Rs 263 the stock is trading at a P/e of aroud 20 times its FY01 earnings. Though the company's growth in turnover is encouraging, the uncertainity of maintaining this growth casts a shadow on the valuations of this stock. The stock seems evenly valued.
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