ABB: So near yet so far… - 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: So near yet so far…

Oct 1, 2001

Asea Brown Boveri (ABB), the transmission and distribution equipment (T&D) major, has seen quite a correction (down 20%) in price since the company declared its first half results in July end. At that time, the company was trading at a P/E of 36x 1HFY02 annualised earnings. The Rs 7.9 bn ABB India manufactures motors, generators and alternators upto 20 megawatt (MW). It commands a 19% share of the Rs 14 bn high tension (HT) switchgear segment. It also manufactures control systems and mini/micro processor-based systems. ABB has also merged ABB Instrumentation, ABB Analytical, ABB Lenzohm Service and Introl India with itself quite recently. The appointed date of amalgamation as per the scheme is April 1, 2001.

So far in FY02 the company has set a good growth momentum for itself. Till 1HFY02 ABB India has shown a 36% turnover growth and a 25% bottomline growth. On the surface the performance does look good. However, despite the surge in turnover ABB has not been able to contain its expenditure. Its expenditure during 1HFY02 surged 35% YoY. A huge increase in tax outgo also put the brakes on bottomline growth. In fact, in 2QFY02 though ABB’s turnover improved 37% YoY, it actually recorded a 11% decline in profits during the period.

Going forward the company is likely to continue showing encouraging growth in turnover YoY owing to a significant order backlog of Rs 6,900 m (based on July end data). Also, the merger move would add another Rs 700 m to its topline annually. However, despite this, its margins are likely to remain under pressure, due to a more or less similar increase in expenditure and higher tax outgo.

In the long run, ABB India’s future seems bright owing to the huge latent potential for power equipment. It would be one of the key players in India’s power infrastructure development. However, it is still to get it’s costing under control. Also, the power equipment business is a cycle of ups and downs. Some quarters there is exceptional business and some are lean quarters, depending on when the power plant gets completed. In the past, the performance of ABB has been quite erratic and one cannot draw solace from it.

At the current price of Rs 198 the stock trades at a P/E of 29x its 1HFY02 annualised earnings.

Equitymaster requests your view! Post a comment on "ABB: So near yet so far… ". Click here!


More Views on News

ABB INDIA Announces Quarterly Results (4QFY20); Net Profit Down 25.9% (Quarterly Result Update)

May 15, 2020 | Updated on May 15, 2020

For the quarter ended March 2020, ABB INDIA has posted a net profit of Rs 660 m (down 25.9% YoY). Sales on the other hand came in at Rs 15 bn (down 17.7% YoY). Read on for a complete analysis of ABB INDIA's quarterly results.

ABB INDIA Announces Quarterly Results (3QFY20); Net Profit Down 49.7% (Quarterly Result Update)

Feb 14, 2020 | Updated on Feb 14, 2020

For the quarter ended December 2019, ABB INDIA has posted a net profit of Rs 647 m (down 49.7% YoY). Sales on the other hand came in at Rs 20 bn (down 0.7% YoY). Read on for a complete analysis of ABB INDIA's quarterly results.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 25, 2020 (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