ABB Q2 PAT may rise 69% at Rs 36cr: Motilal Oswal

Motilal Oswal has come out with its second quarter (July-September) earnings estimates for the capital goods sector. The brokerage house expects ABB to report a 10.6 percent degrowth quarter-on-quarter (up 68.9 percent Y-o-Y) in net profit at Rs 36.1 crore.

Sales of ABB are expected to increase by 7.5 percent Q-o-Q (up 3.5 percent Y-o-Y) to Rs 1,871.9 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to fall by 3.5 percent Q-o-Q (up 60 percent Y-o-Y) to Rs 106.2 crore.

Motilal Oswal's Report on ABB:

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

The order book currently stands at INR 82.3 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 12 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 retention. Debt has grown from INR 3.3 billion to INR 5 billion in December 2012 and correction is likely to take some time.

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