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ABB - Reaping the capex upturn

Sunday, July 29, 2007

The upturn in the power capex cycle continued to remain strong in the June 2007 quarter and it helped ABB report an improved quarterly performance.

As a result, the company’s operating profit grew an impressive 60.6 per cent y-o-y to Rs 163.8 crore in the last quarter, while its income from operations grew 43.7 per cent to Rs 1,401 crore.

Its operating profit margin also grew 120 basis points y-o-y to 11.7 per cent in Q2 CY07. The stock price was unchanged on Thursday. Other large players such as Larsen & Toubro’s operating profit margin also improved by 240 basis points y-o-y to 9.4 per cent in the last quarter.

Meanwhile, ABB’s order intake grew 38 per cent y-o-y to Rs 1,996.3 crore in the last quarter, helped by a Rs 289-crore order from the Delhi Metro Rail Corporation.

Also, the company has offset higher input costs such as steel and non-ferrous metals in the last quarter, thanks to recent contracts which allow passing on of rising material costs. Its adjusted raw material costs as a percentage of income from operations declined 265 basis points y-o-y to 71.4 per cent in Q2 CY07.

Going forward, ABB’s performance is expected to remain strong. Of crucial importance also is its ability to manage rising input costs. At Rs 1,079, the stock gets a discounting of 45 times estimated CY07 earnings, given the growth potential of this sector.

Posted by FR at 11:50 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.