EUR 120.00 For Business Accounts Only

MOSL: Morning India (23/December/19): 1. ABB (Demerger overhang a thing of past; poised for growth); 2. Sun Pharma; 3. Tata Chemicals; 4. Jindal Steel; 5. Tata Global

MOrning India (23/December/19): 1. ABB (Demerger overhang a thing of past; poised for growth); 2. Sun Pharma; 3. Tata Chemicals; 4. Jindal Steel; 5. Tata Global

 

Today’s top research idea

ABB: Demerger overhang a thing of past; poised for growth

• Ex 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. 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: 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.
• Order inflows may be volatile due to short cycle: Order inflows may be volatile over the near term, especially given ups and downs of the economic cycle. While the sharp slowdown in order inflow momentum may be attributed to the current economic slowdown, we believe that order inflows will bounce back sharply as the economy recovers.
• Maintain Buy with TP of INR1,460: We forecast residual business CAGR of 29.5% over CY19-21 and expect ROIC to improve from 21.3% in CY18 to 30%+ by CY21.We assign TP of INR1,460 to the stock based on target PE multiple of 45x on CY21E EPS of INR32.4. Maintain Buy.

Piping hot news

UltraTech leads the race to buy Emami Group’s cement business

UltraTech Cement Ltd, India’s largest producer of the building material, has emerged as the front-runner to buy the cement business of Emami Group in an all-cash deal worth ₹6,500-7,000 crore, according to three people with direct knowledge of the discussions. The sale of Emami Cement Ltd has entered the final binding bid round, with Ambuja Cements Ltd, part of the LafargeHolcim Group, as the only other contender, the people said on condition of anonymity. Ambuja’s offer is less than that of Aditya Birla Group-owned UltraTech, they said without disclosing the value of the bid.