Comments
JM Financial Services
ABB India (Buy)
CMP: ₹800.35
Target: ₹970
ABB India’s 1QCY20 numbers saw a sharp y-o-y decline. Net sales were down 18 per cent y-o-y (in-line with JMFL estimate), but EBITDA saw a significant drop of 90 per cent y-o-y as margins plummeted to 1 per cent (JMFL est: 6.6 per cent), mainly led by a) revenue deferment in March 2020; b) ECL provisions towards projects; c) MTM losses; and d) under-absorption of fixed costs.
The company completed the sale of its solar inverter business for ₹105 crore. Adjusting for profit from the sale of its inverter business, IT refund and loss from discontinued operations, net profit stood at ₹5.2 crore (-94 per cent y-o-y). The only silver lining came from order inflows, which were up 10 per cent y-o-y, led by orders from railways, wind and oil & gas.
The order book was down 6 per cent y-o-y. We expect near-term sales and order inflows to disappoint, on deferment of capex and under-absorption of costs, but we believe ABB will be a beneficiary of early cycle capex, and market share gains in motors segment.
We maintain ‘buy’ with a revised target price of ₹970.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.