ABB India: order inflows rise, earnings miss estimates
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ABB India’s net profit for the September quarter rose 37.3% year-on-year to Rs81 crore and revenue rose to Rs2,055 crore. But the surge in profit was aided by other income, which includes the nearly Rs30 crore it earned on the sale of an asset.
In fact, both profit and revenue were below Bloomberg’s estimates of Rs84.55 crore and Rs2,133.30 crore, respectively. Ebitda (earnings before interest, tax, depreciation and amortization) margin narrowed to 7.1%.
The company follows January-December as its fiscal year. Revenue growth of 4% was led by some pickup seen in its process automation and discrete automation and motion segment, but is below its usual run-rate of 8-10%. Blame the power grid segment for it.
In a post-earnings conference call, the management explained that the decline in the power grid division’s revenue was mainly due to two factors—a forex loss of nearly Rs6 crore and higher provisions that have been set aside due to headwinds from certain infrastructure projects.
The surge seen in ABB India’s other expenses is mainly because of investments made in high-end IT solutions to boost customer satisfaction. Raw material cost as a percentage of sales also saw a bit of a spike, but that according to the management is within the targeted band of 65%, hence not a cause for concern as of now and the company continues to focus on cost reduction.
Meanwhile, order inflows during the quarter rose to Rs2,967 crore, beating estimates of some analysts. Order backlog as of 30 September stood at Rs8,676 crore.
ABB India remains cautiously optimistic and is seeing good traction from utility, infrastructure and transportation sectors, but orders from industry remain muted, the management added.
Currently, ABB India’s one-year forward price-earnings is at 58.10 times, and though valuations have come off from 80.24 times in the last fiscal year, it is higher than peers.
In the past six months, the stock has underperformed the BSE Capital Goods index given its high valuations.