ABB: Will the price sustain? - Views on News from Equitymaster

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

  • MyStocks


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

ABB: Will the price sustain?

Sep 17, 2003

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 INDIA 2019-20 Annual Report Analysis (Annual Result Update)

Oct 27, 2021 | Updated on Oct 27, 2021

Here's an analysis of the annual report of ABB INDIA for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of ABB INDIA. Also includes updates on the valuation of ABB INDIA.

ABB INDIA Announces Quarterly Results (4QFY21); Net Profit Up 128.2% (Quarterly Result Update)

Jul 8, 2021 | Updated on Jul 8, 2021

For the quarter ended March 2021, ABB INDIA has posted a net profit of Rs 2 bn (up 128.2% YoY). Sales on the other hand came in at Rs 16 bn (up 7.0% YoY). Read on for a complete analysis of ABB INDIA's quarterly results.

Infrastructure Boom Ahead. Here are 3 Ways to Play It... (Views On News)

Aug 24, 2021

India is expected to become the third largest construction market next year. For that, it needs huge investments.

G R Infraprojects Makes a Bumper Listing on Bourses. Big Gains for IPO Investors (Views On News)

Jul 19, 2021

GR Infra shares were subscribed over 100 times in its IPO.

Here's Why the Stock of Ashoka Buildcon was in Focus Today (Views On News)

Jul 13, 2021

Ashoka Buildcon shares up on bagging NHAI project.

More Views on News

Most Popular

India's Best Semiconductor Stocks Views On News (Views On News)

Jan 7, 2022

Modern wars are fought with semiconductors. India's best semiconductor stocks have big tailwinds from defence and manufacturing.

10 Indian Companies with the Fastest Growth in Dividend Payouts... (Views On News)

Jan 10, 2022

These companies have been consistently paying higher dividends for several years.

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

Looking for Consistent Compounding Stocks? Here's a Watchlist for You (Views On News)

Jan 6, 2022

These companies have generated mind boggling returns for investors over the years.

Watch Out for these 4 Indian Companies Betting Big on EV Supply Chain (Views On News)

Jan 11, 2022

The upside in supply chain players could be huge but a delay in the transition to EVs, or any policy related hiccups could end the momentum.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Jan 18, 2022 (Close)


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