X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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: Will the price sustain? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 17, 2003

    ABB: Will the price sustain?

    The stock price of automation major, ABB has gained significantly in the last few months. The stock has moved up by around 60% in last 8 months. Lets have a look at the reasons for the run in stock price and find how much growth is fundamental.

    ABB India is a 52% subsidiary of ABB, Switzerland. The key focus areas of the company are the traditional T&D equipment segment and services (focused on catering to day-to-day running and maintenance of plants). It is also focusing on the retail sector (i.e. branded products for retail consumers) for growth. The retail market for products like transformers and other smaller equipment is largely unorganised at the current juncture.

    (Rs m) 1HFY03 1HFY04 Change
    Net Sales 5,260 6,140 16.7%
    Operating Profit (EBDIT) 370 408 10.3%
    Extraordinary items 144 233 61.3%
    Profit after Tax/(Loss) 388 540 39.3%

    Consider 1HFY04 performance of the company first. ABB's topline grew by around 17% YoY and bottomline was up 39%. Revenues from power technologies in 1HFY04 increased by 8% and contributed around 55% to the net sales. Automation revenues were up 16% YoY and contributed around 40% to the total revenues. The PBIT margins from automation business were on a higher side i.e. 8% as compared to 3% from power technologies.

    The company fared well in exports segment and further consolidated its strategic focus on value-based projects, standard products, service and exports. Export orders during the first half of 2003 amounted to Rs 2,101 m as compared with Rs 747 m in the same period last year. The order backlog further strengthened to Rs 10,732 m (0.9x FY03 revenues). It includes orders from both utility and industrial customers for power and automation technologies. The strong order book is a positive for the company.

    The stock gained around 35% in last two months mainly due to heavy export orders bagged by the company. It has received international orders worth US$ 265 m post 1HFY04. This works out to around 1.1x FY03 revenues. It has also received assignments for moderanising and servicing power stations abroad.

    (Rs m) ABB BHEL Thermax
    Net Sales 11,758 69,782 5,386
    PAT 814 5,171 482
    P/E ratio 24.5 17.1 14.3
    Market cap/ Sales ratio 1.7 1.3 1.3

    At the current price of Rs 475, the stock trades at P/E multiple of 24.5x, FY03 earnings. Though the company has been able to win orders, valuations at the current juncture seem to be stretched for an engineering company. While power sector liberalisation could increase order inflow, it is some time away. The market capitalisation to sales ratio of ABB at around 1.7x currently is high when compared with the parent company, ABB international. The parent major is trading at market cap/sales ratio of 0.3x.

     

     

    Equitymaster requests your view! Post a comment on "ABB: Will the price sustain?". Click here!

      
     

    More Views on News

    ABB: Large Orders Remain Muted (Quarterly Results Update - Detailed)

    Aug 2, 2017

    Decisions on government initiatives and private investments were stalled in anticipation of upcoming tax restructure.

    BHEL: Margins Dip into the Negative (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The company also saw order inflows of Rs 18 billion during the quarter, which was a massive 41% YoY lower than the previous year's quarter.

    Cummins Ltd: Domestic Revenues the Saving Grace (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The domestic economy continues to grow largely in areas which are positively impacted through continuing government investments in infrastructure.

    L&T: Amidst a Challenging Business Environment (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Bank credit to industry remained muted and investment momentum was driven mostly by public sector spending.

    L&T: Private Sector Capex Remains in a Tizzy (Quarterly Results Update - Detailed)

    Jul 24, 2017

    Vast majority of private players remain more concerned with debt payback rather than starting new projects.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ABB INDIA LTD. SHARE PRICE


    Aug 18, 2017 (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. - ANSALDO STS COMPARISON

    Compare Company With Charts

    COMPARE ABB INDIA LTD. WITH

    MARKET STATS