Axis Capital maintained buy call on ABB India, but cut target price to Rs 1,410 from Rs 1,513 as the research house marginally lowered CY18 EPS by 1.5 percent to Rs 26 to align with margin trend and higher tax
ABB India stocks rallied 6.6 percent intraday on October 31 after healthy earnings growth for the quarter ended September 2018, but brokerage houses gave a mixed opinion.
The stock was quoting at Rs 1,278, up Rs 68.75, or 5.69 percent on the BSE, at 1212 hours IST.
Jefferies has maintained its buy call on the stock but has slashed target price to Rs 1,700 from Rs 2,050 earlier given a slow pace of margin recovery.
Hence, the research house reduced its CY17-19e margin improvement by 117 bps to 226 bps and also lowered EPS expectations.
It said the company gave strong revenue growth (31 percent YoY ) in Q3CY18, in-line with expectations. The research firm believes as revenue growth continues, leverage will play out leading to better margin.
ABB India reported a healthy 30 percent on year growth in profit to Rs 108.34 crore and 31 percent in revenue to Rs 2,515.4 crore for the quarter ended September 2018, driven by double-digit growth across parameters.
The continued focus on cost-saving measures and the market success of ABB Ability digital products contributed to a strong growth in profits, the company said.
Strong execution boosted the company's revenue, with power grids business showing a strong 71 percent growth, and robotics and motion growing 33 percent YoY.
ABB has received orders worth Rs 2,355 crore in the quarter, higher by 22 percent YoY, driven by a base order growth of 16 percent. The order backlog as of September 2018 was Rs 11,368 crore, which is expected to provide revenue visibility for the coming quarters, ABB said.
On the operating front, EBITDA (earnings before interest, tax, depreciation and amortisation) surged 44.6 percent to Rs 194 crore and margin expanded by 74 bps to 7.71 percent compared to year-ago despite 40 percent increase YoY in other expenses to Rs 516.7 crore.
Axis Capital also maintained buy call on ABB India, but cut target price to Rs 1,410 from Rs 1,513 as the research house marginally lowered CY18 EPS by 1.5 percent to Rs 26 to align with margin trend and higher tax.
Deutsche Bank Research has retained hold rating and raised target price to Rs 1,340 from Rs 1,320, citing fair valuations given low growth in T&D segments. Earnings were ahead of estimates due to improving margins and revenue growth, it said.Macquarie maintained its negative stance on the stock with an underperform rating, but increased target price to Rs 967 from Rs 893 (implying a potential downside of 20 percent). The research house said, the biggest concern has been margins, which continued to disappoint.
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