Sell ABB; target of Rs 637: Angel Broking

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Sell ABB; target of Rs 637: Angel Broking

Angel Broking is bearish on ABB and has recommended sell rating on the stock with a target of Rs 637 in its May 13, 2011 research report.

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Angel Broking is bearish on ABB and has recommended sell rating on the stock with a target of Rs 637 in its May 13, 2011 research report.

"ABB India (ABB) bounced back with strong set of numbers for 1QCY2011 after reporting disappointing results for the last few quarters. The company reported strong 21.5% yoy top-line growth to Rs1,793cr (Rs1,475cr), 5.7% higher than our expectation of Rs1,697cr. PAT also increased to Rs60cr (Rs7cr) on a low base effect, in line with our estimate of Rs62cr."

"For 1QCY2011, ABB's revenue grew by 21.5% yoy to Rs1,793cr (Rs1,475cr), largely aided by 49.6% yoy growth in the power systems segment. Other segments - process automation and low-voltage products - also delivered positive results by growing 15.1% and 33.3%, respectively. Profitability across segments improved on a yoy basis as well as qoq basis. The company's performance also improved on the operational front, with margin improvement of 416bp yoy to 5.7% (6.5% estimated). Strong revenue growth coupled with margin expansion and other income resulted in an eight-fold yoy increase in PAT to Rs60cr (Rs7cr)."

"ABB is back on track after reporting disappointing performance over the past several quarters. However, we believe pricing pressures in the T&D segment are likely to continue on account of increased competition from foreign joint ventures (JVs) and relaxation of pre-qualification norms by PGCIL. Historically, the stock has traded in a wide range of 16-80x forward earnings. At current levels, the stock trades at 42.5x CY2011 EPS and 36.7x CY2012E EPS. We assign a multiple of 27x CY12 EPS to arrive at a target price of Rs 637. We maintain our Sell view on the stock with a revised target price of Rs 637 (Rs 595)," says Angel Broking research report.

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