Active Stocks
Tue Mar 19 2024 13:11:02
  1. Tata Consultancy Services share price
  2. 4,014.70 -3.14%
  1. Tata Steel share price
  2. 150.15 0.37%
  1. Bharti Airtel share price
  2. 1,229.45 0.36%
  1. Power Grid Corporation Of India share price
  2. 261.00 -1.51%
  1. ITC share price
  2. 409.85 -1.81%
Business News/ Markets / Mark To Market/  ABB India’s growth prospects trip after dismal Q1 across segments
BackBack

ABB India’s growth prospects trip after dismal Q1 across segments

Triggers for a rebound in ABB India’s stock price would come only from a margin improvement and steady order flow

.The Indian arm of Swiss-Swedish capital goods maker posted wafer-thin profit margins as it battled covid-19 woesPremium
.The Indian arm of Swiss-Swedish capital goods maker posted wafer-thin profit margins as it battled covid-19 woes

ABB India Ltd’s March quarter (Q1CY20) earnings missed analysts’ forecasts, mirroring the challenges across domestic industrial sectors.

The Indian arm of Swiss-Swedish capital goods maker posted wafer-thin profit margins as it battled covid-19 woes. Earnings before interest, tax, depreciation and amortization (Ebitda) margin at 2.8% for the quarter, was 400 basis points lower year-on-year (y-o-y). Investors would be disappointed given the expectation of 7.3% Ebitda margin. One basis point is one hundredth of a percentage point. Q1’s operating profit at 43 crore was down to a third of the year-ago period.

Graphic: Naveen Kumar Saini/Mint
View Full Image
Graphic: Naveen Kumar Saini/Mint

Click here to enlarge graphic

This was partly led by the 18% y-o-y drop in net revenue. Impacting revenue was “lower sales, non-receipt of delivery clearance, lower service revenue in the nationwide lockdown due to the covid-19 pandemic," said the firm in the results media release. Indeed, pain was felt across business segments. The largest segments, electrification and motion that account for about three-fourths of the revenue, posted a 15% and 21% y-o-y drop, respectively.

Negative operating leverage dragged profits clocked by these two segments by 38% and 70%, respectively. Unfortunately, even the industrial automation and robotics that enjoyed relatively high margins in the recent past, staged a weak show.

Umesh Raut, lead analyst-industrials, Yes Securities (India) Ltd, said: “Profitability during the quarter was significantly impacted from negative operating leverage, adverse product mix and foreign exchange loss." The only bright spot in the quarter’s results was the 10% y-o-y growth in order flows. In spite of this, the overall order book of 4,444 crore offers barely a year’s revenue visibility.

Besides, prospects are dim, too. The company highlighted that the global economy is expected to contract in 2020 after a rapid deterioration in outlook driven by the covid-19 pandemic.

It is not surprising that ABB India’s stock closed 2.2% lower on Thursday even after its precipitous 33% fall since early January. Triggers for a strong rebound in stock price would come only from a margin improvement and sustained order flow in the coming quarters.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 14 May 2020, 10:19 AM IST
Next Story footLogo
Recommended For You
GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie