MOSL: ABB (Buy)-Demerger overhang a thing of past; poised for growth
ABB: Demerger overhang a thing of past; poised for growth
(ABB IN, Mkt Cap USD3.8b, CMP INR1266, TP INR1460, 15% Upside, Buy)
ABB stock goes ex-date on account of demerger of Power Grid business
As the record date for the demerger of the Power Grid business was set as 23 Dec 2019, the stock now trades without the value of the same effective today. For 9MCY19, the Power Grid business reported PAT of INR1.4b (-23% YoY). This is 38% of the reported PAT for the company. Our prior SOTP based valuation ascribed INR276/sh to the Power Grid business at Sep’21E PE multiple of 25x.
A pure play on products and services rather than direct play on capex
Post the demerger of Power Grid business, ABB India’s business is largely products & services oriented with projects forming 7-8% of revenue. This makes it a pure play on the digitalization and automation theme. Today, ABB is a beneficiary of consumption revival as well, especially in the end markets of auto, food and beverages. After coming in at 13% over CY15-18, residual business revenue CAGR is estimated at 14% over CY18-21.
ABB specializes in power and automation technologies. Co. provides a broad range of products, systems, solutions and services that are designed to boost industrial productivity, increase power grid reliability, and enhance energy efficiency. Co.'s automation businesses serve a full range of industries with process optimization, control, measurement and protection applications. Co.'s power businesses focus on power transmission, distribution and power-plant automation, and support electric, gas and water utilities, as well as industrial and commercial customers.
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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