shares information on electric equipment ABB

ABB Ltd (updated - 05 May 2010)
ABB reported dismal results, even compared to its closest peer, Siemens, at its Indian operations. Sales in the quarter ended March 2010 inched up marginally by about 5 per cent to Rs 1,475 crore after four quarters of drop, despite alower base in the same quarter last year.

ABB’s power business, which consists of power systems and power products and contributed 55-60 per cent to total sales, reported a 7 per cent fall in sales. However, healthy industrial growth led to a strong rebound in the automation segment (process automation, discrete automation and motion), with growth of 22 per cent.

Profitability was hit phenomenally, contributed by both divisions, mainly due to cost overruns. Operating profit dropped 84 per cent to Rs 22 crore, as cost of raw materials to sales remained firm at 66 per cent. Net profit, including the impact of exchange loss, was also down by more than 90 per cent to Rs 6.6 crore. However, excluding the one-off exchange loss of over Rs 8 crore, the adjusted net profit was down about 11 per cent.

The power division reported a net loss before interest and tax of Rs 12.5 crore, mainly contributed by a loss of Rs 48.5 crore in the power systems business, as compared to a profit before interest and tax (PBIT) of Rs 82 crore in the March 2009 quarter. Even automation division’s PBIT declined 17 per cent.

Order backlog rose 25 per cent to Rs 8,700 crore, even as order inflows declined 27 per cent (worst in the past six quarters). Nevertheless, analysts are cautiously optimistic about ABB, with expectation of strong growth in order inflows and order backlog due to an improved funding scenario for power projects, upcoming orders from Power Grid Corporation and revival in industrial capex. However, they are cautious about the impact of intense competition and pricing pressures, especially in power products and systems segments, on the company’s financial performance, which has been under strain for some quarters.

The stock has corrected more than 7 per cent since the announcement of its Q1 results. At Rs 728.30, it trades around 33 times CY10 estimated earnings.
source - business standard

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ABB Ltd (updated - 27 May 2010)

What is ABB open offer?
Promoters of ABB have offered to buy 48.51 million shares, or 22.89%, in the firm from shareholders at Rs 900, an 8.8% premium to current market price (CMP) of Rs 826.

The offer by ABB Asea Brown Boveri and ABB (Switzerland) will launch on July 8 and will close on July 27, HSBC Securities and Capital Markets said. ABB Asea Brown Boveri and its unit ABB Norden Holding together hold 52.11% in ABB.

Open offer calculation:
Is there any arbitrage available or should one buy taking open offer into consideration?
ABB current price = Rs 826 e.g. 100 shares are bought.

Currently, ABB holds 52.11% and it has offered to buy 22.89% more which would take their stake to 75% in India unit. So it makes a 47.8% probability that our shares would get tendered in open offer.

So if one buys 100 shares, approximately 48 would go into open offer and he will get payout @ Rs 900 a share.

Net Profit on tendered shares = (Rs 900 - Rs 826) X 48 = Rs 74 X 48 = Rs 3,552.
Net Profit = 4.3% on total capital invested, decent returns for holding period of around 2.5 months!

What past open offers of other companies tell us:
Ranbaxy shareholders were given a similar open offer which was way above its market price at that time and it was at Rs 737 a share from Daiichi Sankyo of Japan while shares were ruling at Rs 550 at time of announcement. The stock has never risen to those levels now almost 2 years have passed, those who bought in anticipation of open offer got payout for small number of shares and larger part of holdings is still stuck.

Then why do foreign companies give open offers?
They are investing in businesses and not at all interested in small short term gains, they think of 5-10 years in advance minimum and bet on future of the economy which a common retail investor doesn`t do.

In case of ABB, the open offer price looks really stretched as the company is already trading at a P/E multiple of 62 and at Rs 900 it would go beyond 67 which is not at all cheap by any stretch of imagination.

ABB has reported an average decline of 34.5% in profits for the past four quarters ended December 2009. The performance has taken a further sharp blow in the March 2010 quarter, with profits falling by 92%. The company`s financial performance has been disappointing mainly due to its exit from a key business segment, delays in some of the projects and fluctuation in input prices.

Company imports nearly 40% of its raw material requirement and is exposed to a large foreign exchange risk; it has to follow an active hedging policy which may be lacking so far. Recent rupee appreciation may hurt financials more.

The probability of giving shares in open offer may go down also as public holding currently stands at less than 15%, which means that the company would have to convince the institutional investors, who hold a total of around 33%, to respond to the offer.

Looking at company prospects in immediate future and history of similar open offer it looks wise to take profits at current market price or have small exposure as stock may fall after the event is over. Even an 8% drop from current levels would take the investor into losses if one buys from the viewpoint of open offer now. If parent doesn`t have intentions of de-listing, profit for the investor is not guaranteed by any open offer.

Conclusion
Investors can book profit at current levels instead of holding it for longer period.
The stock price has jumped from Rs 680 to Rs 820. Buy at current levels and holding for short term expecting profit is not recommended.

ABB Ltd (updated - 23 Sept 2010)
Revenue growth and margins may take time to improve due to long gestation periods in the power business.

Even as the BSE capital goods index has not participated aggressively in the current market rally, power transmission and distribution heavyweight, ABB India (now a 75 per cent subsidiary of its Swiss parent), has witnessed strong momentum in the past few trading sessions. The stock gained nine per cent last week, as compared to 2.5-per cent rise in the Sensex and BSE capital goods index.

Consequently, price-earnings multiple has risen to 31 times CY11 estimated earnings and looks expensive compared to peers, as well as its own historical average. ABB’s closest peer, Siemens, which has moved in line with the broader market, trades at 28 times CY11 estimated earnings. According to an Ambit Capital report, ABB’s stock has traded at an average PE of 28 times during 2003-08.

Investors are taking keen interest in the stock on account of built-up expectations of improved business scenario, especially in the power business, from the second half of CY10, reckon analysts. The segment currently contributes about 55 per cent to sales and 39 per cent to profit before interest and tax. With the order book to sales ratio of 1.35 times, revenue visibility is expected to improve with increased outsourcing by the parent, recovery in the power business and new opportunities in the 765-KV switchgear and transformer. ABB’s automation business will also continue to report strong numbers.

While the worst seems to be over for the company in terms of new order inflows, competition in the transmission and distribution sector has heated up. Revenue growth and margins may take time to improve due to the long-gestation nature of the power business. Not surprisingly, a majority of analysts have a neutral rating on the stock.

ABB Ltd (updated - 03 Nov 2010)
ABB India disappointed analysts again with an eight per cent yearon-year (y-o-y) fall in sales to Rs 1,349 crore due to higher share of long-gestation projects in the order backlog and declining realisations amid tough competition.

Power products (PP) and process automation (PA) segments, together accounting for 46 per cent revenues ( `617 crore), reported a 16 per cent y-o-y decline. Other segments like power systems (PS), discrete automation and low voltage products recorded flatto-marginal growth in sales.

Despite strong control over costs and substantial decline in tax (76 per cent), operating profit and net profit tanked 75 per cent and 86 per cent to `34 crore and `11.5 crore, respectively, due to a fall in the top line, exit costs for the rural electrification (RE) business and losses before interest and tax in PP, PS and PA segments.

The order inflow growth of about six per cent at Rs 2,000 crore was relatively satisfactory, as earlier two quarters saw an average y-o-y decline of 34 per cent in the same. The order book growth of 14 per cent at `9,100 crore was also better compared to the 12.3 per cent rise in the June quarter. The incremental trend augurs well for future sales growth, say analysts.

Though the long-term prospects of the company are good, analysts expect sustained improvement in the operational performance before they recommend the stock. In the medium term, they continue to be cautious about the extent of exit costs in the RE business and the impact of competition on order inflows and realisations.

The stock, at Rs 860.60, trades at a high valuation of 33.5 times CY2011 estimated earnings on the possibility of another open offer (after the recent rise in stake from 52 per cent to 75 per cent by the parent company) and delisting.
source - business standard