Sell ABB India; target of Rs 821: Karvy

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Karvy Stock Broking's report on ABB IndiaOrder inflow for ABB India is expected to improve by 12.1% during CY14-16E with flows from automation segment is estimated to grow at a CAGR of 14% and power segment inflow to remain relatively weak at 10.5% compared to automation segment during CY14-16E. The improvement in the order inflow visibility is primarily driven by new and restructuring of Transmission and Distribution (T&D) systems, renewable energy push, recovery in industrial CapEx cycle, transportation infrastructure and urban infrastructure like Smart Cities project.Power business to revive in a phased manner: Order backlog for power systems remaining flat while power products backlog growing at a CAGR of 8.8% during CY14-16E. We expect the revenues for the segment to grow at a CAGR of 8.4% during CY14-16E and book-to-bill ratio improving to 0.9x by CY16E.Automation to be the fastest growing business: The process automation and discrete automation order backlog could grow at 11.8% and 15.6% during CY14-16E. Revenue for automation business is estimated to grow at a CAGR of 8.2% during CY14-16E with discrete automation and process automation revenues could grow at a CAGR of 9.7% and 5.0% CAGR during CY14-16E.Valuation and Outlook:"Over the years CY04-14, ABB India has traded in the range of 19-240x of one year forward earnings and the mean P/E multiple averaged to 75.1x. We chose to value ABB India on a discounted (consensus discount of 50% to the mean multiple of 75.1x) P/E multiple of 37x of CY16E earnings per share of Rs.16.4 transpiring to a target price of Rs.821 representing a downside of 22% reiterating our “SELL” recommendation on ABB India", says Karvy Stock Broking research report.

Read More