X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ABB: Battered by the slowdown - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

ABB: Battered by the slowdown
Jul 31, 2009

Performance summary
  • Sales fall by 7% YoY during 2QCY09, 8% YoY in 1HCY09 (December ending fiscal). Fall during the quarter led by the power systems business.
  • Operating margins contract drastically by 3.5% YoY during the quarter on the back of a rise in raw material costs, employee costs and other costs (all as percentage of sales).
  • Net profits fall by 37% YoY during the quarter, 35% YoY during the half year period. Apart from the contraction in operating margins, significantly higher depreciation and higher interest expenses cause further damage to the bottomline.


Financial performance snapshot
(Rs m) 2QCY08 2QCY09 Change 1HCY08 1HCY09 Change
Sales 16,163 15,050 -6.9% 31,516 28,982 -8.0%
Expenditure 14,224 13,769 -3.2% 27,824 26,429 -5.0%
Operating profit (EBDITA) 1,939 1,281 -33.9% 3,692 2,552 -30.9%
Operating profit margin (%) 12.0% 8.5%   11.7% 8.8%  
Other income 213 209 -2.2% 398 352 -11.7%
Interest 45 80 78.7% 100 184 84.3%
Depreciation 88 125 41.7% 171 234 36.2%
Profit before tax 2,019 1,284 -36.4% 3,820 2,487 -34.9%
Extraordinary income/(expense) - -   - -  
Tax 701 448 -36.1% 1,325 867 -34.5%
Profit after tax/(loss) 1,318 836 -36.6% 2,495 1,620 -35.1%
Net profit margin (%) 8.2% 5.6%   7.9% 5.6%  
No. of shares       211.9 211.9  
Diluted earnings per share (Rs)*         21.7  
P/E ratio (x)*         32.3  
* On a trailing 12 months basis

What has driven performance in 2QCY09?
  • ABB witnessed its net sales fall by 7% YoY during 2QCY09. This was led by the company’s power systems’ business which reported a fall of 13% YoY. On the other hand, the automation division (process automation and automation products) saw a marginal sales growth of about 3% YoY during the quarter. During the quarter, the company received significant orders for electrical equipment and solutions to enhance reliability in power generation, transmission and distribution, which bodes well for its power segment going forward.

    Segment-wise performance
    (Rs m) 2QCY08 2QCY09 Change 1HCY08 1HCY09 Change
    Power systems            
    Revenue 5,321 4,643 -12.7% 10,442 9,114 -12.7%
    % share 30.4% 27.6%   30.8% 28.6%  
    PBIT margin 7.0% 2.9%   8.1% 4.5%  
    Power products            
    Revenue 5,129 5,017 -2.2% 9,391 9,276 -1.2%
    % share 29.3% 29.8%   27.7% 29.1%  
    PBIT margin 12.2% 13.5%   12.6% 13.1%  
    Process automation            
    Revenue 2,844 2,922 2.7% 5,797 5,277 -9.0%
    % share 16.2% 17.4%   17.1% 16.5%  
    PBIT margin 11.0% 10.3%   12.7% 11.5%  
    Automation products            
    Revenue 3,953 4,043 2.3% 7,903 7,887 -0.2%
    % share 22.6% 24.0%   23.3% 24.7%  
    PBIT margin 14.8% 5.5%   12.4% 6.4%  
    Others            
    Revenue 275 191 -30.5% 386 339 -12.3%
    % share 1.6% 1.1%   1.1% 1.1%  
    PBIT margin 6.8% 13.3%   7.2% 4.3%  
    Total*            
    Revenue 17,522 16,816 -4.0% 33,919 31,893 -6.0%
    PBIT margin 10.9% 8.1%   11.1% 8.7%  
    * Excluding inter-segment adjustments

  • During the quarter, ABB recorded an order inflow of Rs 21 bn, which was 4% lower than the orders booked during 2QCY08. At the end of June 2009, the company’s unexecuted orderbook stood at nearly Rs 76 bn, which is a 13% rise compared to the same period last year.

  • ABB’s operating margins contracted by 3.5% during 2QCY09. This fall was due to higher raw material, employee and other costs. Based on segments, the power systems and automation products segments saw a big contraction in PBIT margins. The automation products segment (24% of total sales) recorded the worst performance with its PBIT margins declining from 14.8% in 2QCY08 to 5.5% in 2QCY09. On a half yearly basis though, except power products, the other three segments recorded contraction in PBIT margins.

  • On the back of a severe fall in operating margins, higher depreciation charges and higher interest costs (up 79% YoY), ABB recorded a 37% YoY fall in its bottomline during 2QCY09.

What to expect?
At the current price of Rs 702, the stock is trading at a multiple of 16.5 times our estimated CY11 earnings. As indicated in the results press release, ABB’s management is of the view that the market dynamics of the Indian economy are shifting, with public expenditure being greater than private investment currently. Although the company sees that the improvement in the macroeconomic indicators and the expected growth in GDP as encouraging, certain industrial segments continue to face challenges in driving demand. We shall soon update our research report factoring in the company’s performance in the year to date.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2019
Get our special report, Zero To Millions
(2019 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ABB INDIA LTD. SHARE PRICE


Nov 19, 2018 (Close)

TRACK ABB INDIA LTD.

  • Track your investment in ABB INDIA LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON ABB INDIA LTD.

ABB INDIA LTD. - JAIN IRRIGATION COMPARISON

COMPARE ABB INDIA LTD. WITH

MARKET STATS