ABB India: Expensive valuations to weigh on stock's performance

Jitendra Kumar Gupta Moneycontrol Research

Efforts to diversify into emerging markets and businesses has helped ABB India (ABB) consistently deliver robust revenue growth over the last few quarters. This is quite impressive in the light of the slow growth faced by most engineering companies in India. During the June quarter, the company reported 21 percent year-on-year growth in sales to Rs 2,713 crore. Its order book growth trajectory remains strong, up 11 percent at Rs 10,717 crore.

Result at a glance
ABB, which operates in different segments, witnessed strong traction in its overall business portfolio. Among segments, robotics and automation saw robust (34 percent) revenue growth followed by power grid business which grew 41 percent. Electrification and industrial automation continues to be a drag on overall growth.

Due to cost saving and improvement in product mix towards smart products like power grid and robotics, it saw a 150 basis points improvement in operating profit. During the quarter gone by, earnings before interest, tax, depreciation and amortisation (EBITDA) margin stood at 5.7 percent as against 4.2 percent YoY. It was able to post a robust 65 percent growth in operating profit to Rs 155 crore on higher margins.

This is also the reason why it saw a 35 percent spurt in profit to Rs 102 crore, recording a net profit margin of 3.8 percent as against 3.4 percent YoY.