Sell ABB, target Rs 1180; Performance hurt by ECL provisioning: MOST

In the quarter ended June 2017, the company has posted revenue of Rs 2230 crore, EBIDTA margin of 6.6 percent and EBITDA of Rs 150 crore, which is below research firm estimate due to ECL provisioning done under Ind-AS accounting system and expenses incurred on developing new products.

July 21, 2017 / 13:56 IST

IRB Infrastructure Developers | In 2020 so far, the share price has moved up 76 percent to Rs 131.20. It's trailing twelve months (TTM) P/E was 6.40 multiple while 5-year average P/E was 8.30 multiple.

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Motilal Oswal has maintained sell rating on ABB India with a target price of Rs 1180.

In the quarter ended June 2017, the company has posted revenue of Rs 2230 crore, EBIDTA margin of 6.6 percent and EBITDA of Rs 150 crore, which is below research firm estimate due to ECL provisioning done under Ind-AS accounting system and expenses incurred on developing new products.

Meanwhile, the company's gross margin improved 160 bp to 35.9 percent, driven by initiatives undertaken over the past 3-4 years toward increased localization, rationalization of supply chain, improving efficiency, better project management capabilities and lower raw material prices, said Motilal Oswal.

In the quarter gone by the order inflow has increased 13 percent to Rs 2300, driven by finalization of base orders. However, the large-ticket orders did not materialize during the quarter, given the cautious approach adopted by clients in the run-up to GST implementation. The key sectors driving base orders were utilities, transmission and infrastructure, while industrial companies continued to incur operational capex.

The management is optimistic on the demand scenario, driven by government capex. It continues to remain focused on margin expansion via its efforts toward operational efficiency and localization," it added.