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Kotak Securities
ABB (Buy)
CMP: ₹1,209.50
Target: ₹1,434
Though there has not been much improvement in broad macro indicators on power and industrial investment, T&D (trasmission & distribution) equipment manufacturers have recorded healthy growth in terms of order intake in the third quarter.
This is also corroborated by contract data from PGCIL in the 9MFY17 period. During this period, PGCIL has awarded contracts of ₹21,940 crore as against ₹13,460 crore in the corresponding quarter of the previous fiscal.
ABB reported the highest increase in order intake which was mainly led by large UHVDC order of ₹3,600 crore for transferring power from Raigarh to Pugalur in TN.
The management of Transformers and Rectifiers Ltd indicated that good orders are coming in the 400 KV transformers from states across India.
Given the strong order book, we project 52 per cent CAGR in earnings between CY16-18. On account of the robust earnings growth coupled with robust cash flow generation, we maintain our positive view on the company and maintain ‘Buy’.
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