ABB Q1 PAT seen up 7.4% at Rs 55.4 cr: Motilal Oswal

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for the capital goods sector. The brokerage house expects ABB to report a 30.3 percent growth quarter-on-quarter (rise of 7.4 percent year-on-year) in net profit at Rs 55.4 crore.

Revenues are expected to decrease by 1.5 percent Q-o-Q (up 3 percent Y-o-Y) to Rs 1,940.3 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 19.2 percent Q-o-Q (up 19.8 percent Y-o-Y) to Rs 127 crore.

Motilal Oswal report on ABB

We expect profitability to show gradual improvement, though it will remain muted, particularly in Project businesses, impacted by higher competitive intensity, slower execution and execution of low margin fixed price contracts. Also, the benefit of softening commodity prices has largely been negated by INR depreciation - 40 percent of the raw material consumption is imported (largely from parent company).

Order book currently stands at INR 82.2 billion, down 9 percent Y-o-Y. ABB has not received any meaningful large order in the last 12 months. We expect order intake to grow 14 percent in CY13, over a low base.

There are signs of increasing pressure on working capital due to tightening liquidity conditions; long cycle businesses in Power Systems and Process Automation have high contractual retentions. Debt levels have increased to INR 5 billion from INR 3.3 billion in December 2012 and correction is likely to take some time.