MOSL: ABB (Sell)-Superior execution/mix/cost control in continued business
(ABB IN, Mkt Cap USD3.7b, CMP INR1229, TP INR1020, 17% Downside, Sell)
Continued business delivers healthy growth: Revenue increased 15% YoY to INR19.7b in 4QCY18. EBITDA grew 48% YoY to INR2.2b, while PAT increased 58% YoY to INR1.3b. For CY18, sales/EBIDTA/PAT from the continued business grew 6%/10%/13%. We note that ABB has shown ‘power grid’ as a discontinued business as it has entered into an agreement with Hitachi – at global level – to sell this business. During the quarter, discontinued business revenue grew 6% YoY to INR11.6b, while EBIT/PAT declined 2.4%/22% YoY to INR1.1b/INR0.7b.
Margins supported by execution of better-margin orders, operating leverage: Continued business gross margin expanded by 210bp YoY to 32.6% and operating margin by 250bp YoY to 11.0%, driven by (a) operating leverage on better execution, (b) improved revenue mix and (c) strong control over RM cost.
4Q order inflow inches up: Order inflow grew 17% YoY to INR19b in 4QCY18, supported by both base and large orders. Order book stands at INR42.3b (+10% YoY), providing revenue visibility of 0.6x its CY18 revenue of INR66b. Lower visibility in the order book is on account of the short cycle nature of the business that the company now retains with itself.
ABB is engaged in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. Co. works with customers to engineer and install networks, facilities and plants with particular emphasis on enhancing efficiency, reliability and productivity for customers who generate, convert, transmit, distribute and consume energy. Co.'s portfolio ranges from switches and sockets to robots, and from large transformers to control systems that manage entire power networks and factories.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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