Monday, May 25, 2009


Promising outlook
ABB Limited (India)’s revenues declined 9.2% yoy to Rs. 14.1 bn in Q1’09 on account of weak order execution. Net profit of the Company was Rs. 784 mn, 33.4% lower than the previous year quarter. This was mainly due to an increase in other expenditures, depreciation charge and interest expenses in Q1’09 vis-à-vis Q1’08. However, on the back of improved order inflows for the Company during Q1’09 and positive recent political developments in the country, we have upwardly revised our estimates for the Company. Our valuation model suggests an upside potential of 16.5% for the Company’s stock price from the current market price of Rs. 617.1. We thus, upgrade our rating from Hold to Buy.

Orders inflows expected to increase:

■ The postponement of several power projects, particularly by private players in FY08, coupled with ABB’s decision to exit rural electrification projects, had led to a flat growth in order inflows for the power division in FY08 vis-à-vis FY07. Orders from government utilities had remained
strong, thereby offsetting the decline in orders from private players.

■ Order inflows of the Company in Q1’09 increased 83% sequentially, mainly attributable to the finalization of orders from Power Grid Corporation of India. The inflows in Q1’09 were the second best ever for the Company. The current order book of the Company stands at Rs. 70.3
bn, representing 1x of FY08 revenues.

■ With a peak power deficit of 16% and growing power needs, India has significant scope to increase its generation capacity. In the medium to long term, we should see robust order inflows for the Company on the back of an increase in government spending in power and other
infrastructure related projects.

To see full report: ABB LIMITED