Sell ABB; target of Rs 800: Kotak Securities

Kotak Securities research report on ABB“ABB's broad numbers were in line with estimates though the bottomline was a tad lower than our estimates. EBTIDA margins have expanded despite higher other expenditure and certain one-time charges related to new plants. The outlook on margins remain positive. Order intake was weak during the quarter due to delay in few large orders. The management opined that the bullishness apparent in the Q1CY14 has to some extent lost steam. Notwithstanding this, the management believes that the industrial outlook would only strengthen from hereon.” “After few years of weak profitability, the management is optimistic of moving into a steady profit growth path. However, it appears that the stock price is building in an exponential growth in profits. This is unlikely to be case given the current level of order backlog and still weak capex cycle. Valuations remain very demanding. We value the stock at 31x one year forward earnings (median multiple of earlier years), thus arriving at an unchanged price target of Rs 800. In view of the steep downside to target price, we maintain Sell on the stock,” says Kotak Securities research report.  

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