MOSL: ABB (Sell)-GST implementation-led execution slowdown impacts performance
​ABB: GST implementation-led execution slowdown impacts performance
(ABB IN, Mkt Cap USD4.6b, CMP INR1400, TP INR1230, 12% Downside, Sell)
- Operational performance below expectations: 3QCY17 revenue declined 7% YoY to INR19.2b, missing our estimate of INR23.1b. Adjusted EBIDTA margin of 5.4% (-40bp YoY) too was below our estimate of 8.5%. Adjusting for forex gain of INR300m, EBITDA declined 12% YoY to INR1.0b, below our estimate of INR2.0b. EBIDTA was impacted by negative operating leverage during the quarter. PAT of INR0.5b too missed our estimate of INR0.9b.
- Gross margin improves 220bp YoY to 36.5% - at all-time high: Gross margin improved 220bp YoY to 36.5%, driven by initiatives undertaken over the past 3-4 years toward increased localization, improved operational efficiency and adaptation to customer requirement. EBITDA margin shrunk 40bp YoY to 5.4%.
- 3Q order inflow declines 35% YoY on absence of large order finalization: Order inflow declined 35% YoY to INR19.4b in 3QCY17 on account of absence of finalization of large orders. Large-ticket orders did not materialize during the quarter due to cautious approach adopted by clients on account of GST implementation. 3QCY16 included a large traction transformer order of INR10b. Key sectors driving base orders were infrastructure and transport, while industrial companies continued to incur operational capex. Order backlog stands at INR121b (+40% YoY), providing revenue visibility of 1.4x its CY16 revenue.
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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