Rating matrix ABB India (ABB) | 1280content.icicidirect.com/mailimages/IDirect_ABBIndia_Q3CY18.pdf · ABB is witnessing strong visibility across segments. This is due to opex picking-up

October 31, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Strong performance…

ABB India reported stellar Q3CY18 results, which were above our

estimates. Revenue grew growth 31.3% YoY at | 2515 crore as all

segments delivered double digit revenue growth, viz. power grids,

robotics and motion, electrification products and industrial automation

grew 33.2%, 32.7%, 21.1% and 21.1%, respectively. We expected

revenue of | 2350 crore for the quarter

EBITDA grew 44.6% YoY to | 194 crore (our estimate: | 164 crore)

primarily due to lower employee & sub-contracting expenses. Gross

margins fell 110 bps YoY. EBITDA margins were at 7.7% vs. 7% YoY

PAT came in at | 108.3 crore, up 29.9% YoY primarily due to lower

other income, which declined 24.5% YoY

Total order inflow increased to | 2,355 crore, up 22% YoY led by

growth in base orders and exports. Base orders grew 16% YoY. The

base order growth was supported by offerings for smart factory

applications and ABB AbilityTM digital solutions in sectors like food &

beverage and building automation. The order backlog as of September

2018 was at | 11,368 crore

Discontinuing substation EPC business, capex in power T&D, smart grid

solutions, railways give strong visibility

ABB has discontinued its substation EPC business which was ~4-5% of

its revenue. Going forward, the company is eyeing substantial

opportunities in its power grids segment. Under-investment in this space

and 'Power for all' initiative of current governments is likely to help ABB

keep its order book ticking. ABB, a pioneer in smart grid solutions is also

expecting to benefit from accelerated pace of addition in renewables (175

GW by FY22E). Electrification of railways, 30,000 ckm by FY22E by

spending ~| 35,000 crore, introduction of electric locomotives wherein

ABB supplies traction transformers (~| 10,000 crore opportunity), spends

on network expansion/ de-congestion and slew of metro projects across

the country are likely to open opportunities for ABB’s electrification and

power solutions (transformers, turbochargers, etc).

Strong visibility across segments, robust exports and services

ABB is witnessing strong visibility across segments. This is due to opex

picking-up across user industries like cement, oil & gas, food & beverages,

steel, etc. Thus, we expect ABB's industrial solutions segment to grow at

9.5% CAGR, in CY17-19E. ABB’s other segments, i.e. power grids and

electrification are also expected to grow 9.5% and 13.9%, respectively, in

CY17-19E. Rising proportion of exports and services will also be positive

for margins of ABB, going forward. In Q3CY18, order intake growth from

exports (+171% YoY) and services (+18% YoY) helped drive overall

growth (order inflow) of 22%YoY. On the renewables front, ABB's

leadership in solar inverters, step-up transformers and grid stabilisation

systems is likely to open opportunities of over | 8500 crore in FY19-22E.

In e-mobility segment, ABB's technical prowess in charging infrastructure

space is also likely to open domestic opportunities worth ~| 1215 crore in

the next two to three years. With all cylinders firing and robust existing

order book of | 11,368 crore, we believe ABB will clock revenue, EBITDA

and PAT grow of 14%, 20.5% and 21.3% CAGR respectively over CY17-

19E. We value the company at 50x CY19E earnings to arrive at a target

price of | 1460. We maintain BUY recommendation on the company.

ABB India (ABB) | 1280

Rating matrix

Rating Matrix

Rating : Buy

Target : | 1460

Target Period : 12 - 15 months

Potential Upside : 14%

What’s changed?

Target Changed from | 1400 to | 1460

EPS CY19E Unchanged

EPS CY20E Unchanged

Rating Unchanged

Quarterly performance

Q3CY18 Q3CY17 YoY (%) Q2CY18 QoQ (%)

Revenue 2,515.4 1,915.4 31.3 2,712.7 -7.3

EBITDA -97.0 -116.4 -16.6 -44.5 118.0

EBITDA (%) -3.9 -6.1 220 bps -1.6 -230 bps

PAT 20.1 15.2 32.0 23.2 -13.3

Key financials

| Crore CY16 CY17 CY18E CY19E

Revenue 8,648 9,087 10,378 11,819

EBITDA 747 736 844 1,068

EBITDA margin 8.6% 8.1% 8.1% 9.0%

Net Profit 376 420 483 619

EPS (|) 17.8 19.8 22.8 29.2

Valuation summary

(x) CY16 CY17 CY18E CY19E

P/E 72.1 64.6 56.2 43.8

Target P/E 82.2 73.7 64.1 50.0

EV / EBITDA 35.5 34.8 30.5 23.8

P/BV 8.3 7.5 6.9 6.1

RoNW (%) 11 11.6 12.2 14.0

RoCE (%) 17.5 23.2 23.9 25.6

Stock data

Average Volumes (shares) 441000

Market Capitalization | 27124 Crore

Total Debt (CY17) | 8 Crore

Cash and Investments (CY17) | 1491.6 crore

EV (CY17) | 25640.6 Crore

52 week H/L (BSE) (|) 1744 / 1123

Equity capital | 42.4 Crore

Face value | 2

MF Holding (%) 5.8

FII Holding (%) 3.1

Promoter Holding (%) 75

Price performance

Return (%) 1M 3M 6M 12M

ABB (14.3) (0.1) (11.1) (13.6)

Siemens (4.0) (7.3) (19.2) (28.5)

GE T&D (1.3) (18.9) (38.5) (40.9)

Research Analyst

Chirag J Shah

[email protected]

Sagar K Gandhi

[email protected]

mailto:[email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis

Q3CY18 Q3CY18E Q3CY17 YoY (%) Q2CY18 QoQ (%) Comments

Revenue 2,515.4 2,350.0 1,915.4 31.3 2,712.7 -7.3

Revenue grew growth 31.3% YoY at | 2515 crore as all the segments delivered

double digit revenue growth, viz. Power Grids, Robotics and Motion, Electrification

Products and Industrial Automation grew 33.2%, 32.7%, 21.1% and 21.1%

respectively

Other Income 28.5 32.0 37.8 -24.5 23.6 21.0

Total Revenue 2,543.9 2,382.0 1,953.1 30.2 2,736.3 -7.0

Raw material cost 1,417.1 1,144.5 23.8 1,588.8 -10.8

Purchase of traded goods 147.7 69.4 113.0 133.3 10.8

Changes in inventory -97.0 -116.4 -44.5

Sub-contract & direct exp 124.3 112.8 117.9 645 bps 125.4 -104 bps

Employee Expenses 212.7 193.2 203.4 4.6 223.1 -4.7

Other expenses 516.7 427.7 362.4 42.6 490.8 5.3

Operating Profit (EBITDA) 194.0 164.0 134.2 44.6 195.9 -1.0

EBITDA grew 44.6% YoY to | 194 crore (our estimates | 164 crore) primarily due to

lower employee and sub-contracting expenses. Gross margins declined 110 bps

YoY.

EBITDA Margins 7.7% 7.0 7.0% 10.1 7.2% 6.8

Interest 20.1 18.0 15.2 32.0 23.2 -13.3

Depreciation 37.1 38.9 38.9 -4.6 35.6 4.1

Total Tax 56.9 40.3267 34.4 65.4 58.7 -2.9

Extraordinary items 0.0 0 0.0 0.0

PAT 108.3 98.7309 83.4 29.9 102.1 6.2

Segment-wise Q3CY18 Q3CY18E Q3CY17 YoY (%) Q2CY18 QoQ (%)

Revenue

Power Grids 1032.1 774.8 33.2 1060.6 -2.7

Robotics and Motion 592.1 446.2 32.7 615.2 -3.8

Electrification Products 571 471.5 21.1 646.1 -11.6

Industrial Automation 345 285.4 21.1 376.8 -8.3

Total 2515.5 1915.4 31.3 2712.7 -7.3

EBIT Margin

Power Grids 12.4% 6.7% 10.3%

Robotics and Motion 8.8% 9.1% 8.2%

Electrification Products 8.6% 9.7% 8.9%

Industrial Automation 11.5% 13.7% 10.1%

Source: Company, ICICI Direct Research

Change in estimates

CY17 CY18E CY19E

(| Crore) Old New % Change Old New % Change

Revenue 9,208.3 10,502.6 10,502.6 0.0 11,959.1 11,959.1 0.0

EBITDA 736.1 844.5 844.5 0.0 1,068.4 1,068.4 0.0

EBITDA Margin (%) 0.1 0.1 0.1 0 bps 0.1 0.1 0 bps

PAT 420.0 482.7 482.7 0.0 619.3 619.3 0.0

EPS (|) 19.8 22.8 22.8 0.0 29.2 29.2 0.0



Company Analysis

Revenues to grow at 14% CAGR in CY17-19E

We expect revenues to increase from | 9,087 crore in CY17 to | 11,819

crore in CY19E at a CAGR of 14% in CY17-19E. We expect revenue

growth on the back of improved execution from all the key segments, viz.

power grids, electrification products, robotics and motion and industrial

automation. We expect these segments to grow at a CAGR of 9.5%,

13.9%, 10.8% and 9.5% respectively. Order inflows in these segments are

also expected to grow healthy at 14%, 12%, 15% and 15.5% respectively

over CY17-19E.

Going forward, we expect ABB to clock revenues of | 4591 crore from

power grid segment, | 3162 crore from electrification products segment,

| 2377 crore from the robotics and motion segment and | 1689 crore

form the industrial automation segment. EBIT margins in the power grids

segment is expected to be stable at ~5.7%, electrification products

segment at ~11.7%, robotics & motion segment at ~8.5% and industrial

automaton segment at ~11.4%. We estimate power grids, electrification

products, robotics and motion and industrial automation to contribute

39%, 20%, 27% and 14% to the topline respectively in CY19E.

Exhibit 1: Revenue trend

8,1408,648

9,087

10,378

11,819

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

CY15 CY16 CY17 CY18E CY19E

| c

rore

Revenue


Exhibit 2: Order inflow trend

8405

12792

9720

11029

12618

0

2000

4000

6000

8000

10000

12000

14000


| c

rore

Total order inflows

Source: Company, ICICI Direct, Research

Exhibit 3: Order backlog trend

8137

1213211747

1239913198

0

2000

4000

6000

8000

10000

12000

14000


| c

rore

Total order backlog

Source: Company, ICICI Direct, Research

We expect ABB to report revenue growth of 14% CAGR over

CY17-19E on the back of improved execution from all the key

segments, viz. power grids, electrification products, robotics

and motion and industrial automation. We expect these

segments to grow at a CAGR of 9.5%, 13.9%, 10.8% and 9.5%

respectively.


Exhibit 4: Revenue segmentation (%)

41% 39% 40% 41% 39%

24%20% 20% 20% 20%

19%25% 25% 25% 27%

15% 16% 15% 14% 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Power Grid Robotics and Motion

Electrification Products Industrial Automation


Exhibit 5: Power grids revenue and EBIT trend

35333691

3832

4234

4591

6.16.3

4.6

5.7

5.7

0

1000

2000

3000

4000

5000


| c

rore

0

1

2

3

4

5

6

7

%

Power Grid EBIT Margins (%)

Source: Company, ICICIdirect.com, Research

Exhibit 6: Electrification products revenue and EBIT trend

1651

2390 24392574

3162

11.6

11.9 11.511.7

11.7

0

500

1000

1500

2000

2500

3000

3500


| c

rore

5

6

7

8

9

10

11

12

13

14

%

Electrification Products EBIT Margins (%)


Exhibit 7: Robotics and motion revenue and EBIT trend

20621936 1936

2068

2377

8.28.4

8.9

8.5 8.5

0

500

1000

1500

2000

2500


| c

rore

5

6

7

8

9

10

%

Robotics and Motion EBIT Margins (%)


Exhibit 8: Industrial automation revenue and EBIT trend

1326

14851409

1502

168911.612.1

10.6 11.4

11.4

0

500

1000

1500

2000


| c

rore

5

6

7

8

9

10

11

12

13

14

%

Industrial Automation EBIT Margins (%)



EBITDA to grow at 20.5% CAGR in CY17-19E; margins to improve

The operating income grew at 11.9% CAGR over CY13-17. This was

despite subdued growth of 4.2% in revenue over the same period. This

was mainly due to decrease in input prices. Raw material cost as a

percentage of sales declined from 63.8% in CY13 to 59.7% in CY17.

Accordingly, EBITDA margins increased from 6.1% to 8.1% in CY17.

CY16 and CY17 witnessed some drop in margins (8.6% in CY16 and 8.1%

in CY17 from 8.8% in CY15), due to higher contribution from projects

segment of the business.

Going forward, we expect this trend to reverse on the back of hardening

commodity prices. We expect this cost to be ~60% of revenue in the

coming years. Despite increase in operating costs, we expect the EBITDA

margins for the company to improve. This is because of increasing

contribution of high margin ‘electrification products’ in the topline.

Accordingly, we expect inch up to 8.9% in CY19E. Overall, higher

contribution by sale of products and increase in local content is also like

to support the margins going forward. Thus, we expect EBITDA margins

of 8.4% and 8.9% in CY18E and CY19E respectively. We expect absolute

EBITDA to grow at 20.5% CAGR in CY17-19E vs. 11.9% in CY13-17. Thus,

we expect ABB to report absolute EBITDA of | 1068 crore in CY19E.

Exhibit 9: EBITDA and EBITDA margin trend

713 747 736

880

1,068

8.8

8.6

8.1

8.5

9.0

-

200

400

600

800

1,000

1,200


| c

rore

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0

9.2

%

EBITDA EBITDA margin (%)


PAT to grow at 21.3% CAGR over CY17-19E

Net profit grew at 23.7% CAGR in CY13-17. This was higher than revenue

growth during the same period (4.2% CAGR in CY13-17) due to improving

gross margins from 36.2% in CY13 to 41.1% in CY17 and accelerated

growth in other income of the company. Other income of the company

grew from | 7 crore in CY13 to | 121 crore in CY17. Higher interest

income was due to growing cash balance on the books of the company.

Cash balance grew from | 316.6 crore in CY13 to | 1491.6 crore in CY17.

Going forward, we expect trend to continue albeit at a slower pace. We

estimate other income to grow at 7.6% CAGR over the next two years to |

140 crore in CY19E.

Accordingly, we expect PAT to grow at a CAGR of 21.3% from | 420 crore

in CY17 to | 619 crore in CY19E.

We expect EBITDA margins of 8.4% and 8.9% in CY18E and

CY19E respectively. We expect absolute EBITDA to grow at

20.5% CAGR in CY17-19E.

We expect PAT to grow at a CAGR of 21.3% from | 420

crore in CY17 to | 618 crore in CY19E. This is on the back

of improving operating performance. We estimate other

income to grow at 7.6% CAGR over the next two years.


Exhibit 10: PAT and PAT margin trend

300

376

420 505 6

19

3.7

4.44.6

4.9

5.2

-

100

200

300

400

500

600

700


| c

rore

-

1

2

3

4

5

6

%

Net Profit Margins (%)


Exhibit 11: Interest income trend

65

121 125

140

0

20

40

60

80

100

120

140

160

CY16 CY17 CY18E CY19E

| c

rore

Interest income trend


Exhibit 12: Cash balance trend

1189

14921419

1769

0

500

1000

1500

2000


| c

rore

Cash balance trend


Return ratios to remain stable

In the last few years (CY15-17), the RoE, RoCE have improved from 10%,

11.9% in CY15 to 11.6%, 23.2%, respectively, in CY17. This was due to an

improving operating performance of the company. The company also

incurred reasonable capex of | 100-200 crore per year over the same

period.

Going forward, we expect return ratios (RoEs & RoCEs) to further improve

to 14% and 25.6%, respectively, in CY19E due to improving margins and

moderate capex spending of | 175-200 crore per year over CY17-19E. We

also expect RoICs to remain stable at ~42 over CY17-19E.


Exhibit 13: Return ratios to improve

13.3

23.7

41.2

36.8

41.8

11.9

17.5

23.223.9

25.6

10.011.4 11.6

12.214.0

-

5

10

15

20

25

30

35

40

45


%RoCE (%) RoE (%) RoIC (%)


Stable cash flows; CFO/EBITDA at 0.4-0.7x

The company is expected to generate stable cash flows over the next two

years. We estimate CFOs of | 310 crore and | 797 crore in CY18E and

CY19E respectively.

Exhibit 14: CFO/EBITDA trend

417

1402

1299

310

797

713747 736

844

1068

0.6

1.9

1.8

0.4

0.7

0

200

400

600

800

1000

1200

1400

1600


| c

rore

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

(x)

CFO EBITDA CFO:EBITDA



Exhibit 15: Strong FCF generation, FCF yield

346

1271

1128

597

1301.3

4.74.2

0.5

2.2

0

200

400

600

800

1000

1200

1400


| c

rore

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

%

FCF FCF Yield


Exhibit 16: Net cash as percentage of net worth (47% in CY20E)

574

1189

14921395

1745

19

36

41

35

39

0

500

1000

1500

2000


| c

rore

0

10

20

30

40

50

%

Net Cash As %age of Networth


ABB’s working capital is likely to remain stable at 35-40 days in CY17-19E.

Going forward, we expect dividends payouts between 20-30% over CY17-

19E.

Exhibit 17: Dividend payout to be 30%, going forward

17.819.8

22.8

4.0 4.4 5.0 5.5

29.2

2322 22

19

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


| p

er s

hare

0

5

10

15

20

25

%

EPS DPS Dividend Payout


Exhibit 18: Working capital, best-in-class despite large and lumpy orders

40 46

45

45

125

112

115

115

89 1

09

100

100

76

49

60

60

0

50

100

150


Days

0

20

40

60

80

100

NW

C d

ays

Inventory Days Debtor Days

Creditor Days Net Working Capital Days



Outlook and valuation

ABB is a pioneer in developing technology-led future-ready solutions. It

has strong expertise in manufacture of electric motors, generators,

transformers, electrical equipments and electricity distribution and control

apparatus. With its leadership in power and electrical space, the company

successfully raced into other segments like enterprise-led solutions,

renewable and E-mobility solutions among others. Going forward, with

governments increasing spend on railway modernization, renewable,

power T & D and E-mobility; companies like ABB are likely to be the major

beneficiaries. India’s apex planning body Niti Aayog has also tied-up with

ABB to work across various sectors of economy, such as the power and

water utilities, industries like food as well as the heavy industries and the

transport (rail and metro) and infrastructure to suggest solutions for

digitalization, incorporating the Internet of Things (IoT) and Artificial

Intelligence (AI) technologies. The initiative also covers the fast growing

segment of electric mobility.

Additionally, ABB also has extensive capabilities in industrial automation

segment. With green shoots visible in industrial capex, ABB is well poised

to capture this upcoming opportunity. ABB expertise in the robotics

segments is likely to provide significant leg-up to the company in this

space. On the exports front, ABB (India) has been repositioned as a local

manufacturing hub for exports to various regions such as MENA (Middle

East and North Africa) and SEA (South East Asia) by the parent

organisation as part of its global strategy.

Overall, we expect order inflows to grow at a CAGR of 13.9% over CY17-

19E led by all the four segments. We expect order inflows of power grids,

robotics and Motion, electrification products and industrial automation to

grow at 14%, 15%, 12% and 15.5% CAGR over CY1719E respectively.

Given that ABB’s order book is mainly inclined towards base order (short

term contract with execution period of less than 12 months and faster

cash conversion), the robust execution is likely to support strong top-line

growth over CY17-19E. Accordingly, we expect ABB to deliver revenue

growth of 14% CAGR over CY17-19E. We also estimate healthy margin

expansion on the back of higher local content in ABB’s products going

forward. EBITDA margins are likely to improve from 8% in CY17 to 8.9%

in CY19E. EBITDA and PAT are thus expected to post CAGR growth of

20.5% and 21.3% CAGR respectively over CY17-19E.

In terms of valuation, ABB has historically traded at premium valuations

of 50-60x (15-year average P/E at ~58x). This is because ABB possesses

wide moat in the form of its technical capabilities. Superior technical

capabilities coupled with diverse competencies across large government

and industrial contracts gives the company significant edge over any local

or global competition. This has also led to ABB delivering consistent

business performance over the past many years. Despite fluctuating

business cycles (private capex) and erratic movements in government

capex, ABB has delivered a topline, bottomline CAGR of 3.6%, 24.4%,

respectively, in the past five years (CY12-17). It has also clocked average

RoEs, RoCEs of 11%, 17.5%, respectively, over CY15-17. Thus, we

believe ABB is an excellent combination of strong business model,

healthy order pipeline, efficient working capital management and high

quality management. Accordingly, we ascribe a P/E multiple of 50x on

CY19E EPS of | 29.2 to arrive at a fair value of | 1460/ share. We have a

Buy recommendation on the company.

We believe ABB is an excellent combination of strong

business model, healthy order pipeline, efficient working

capital management, healthy dividends and high quality

management


Recommendation history vs. consensus

0

10

20

30

40

50

60

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Oct-18Jul-18May-18Mar-18Dec-17Oct-17Jul-17May-17Mar-17Dec-16Oct-16Jul-16May-16Feb-16Dec-15Oct-15

(%

)

(|)

Series1 Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research, Initiated coverage on 20th July 2018

Key events

[

Date/Year Event

2013 ABB inaugurates two new manufacturing plants for power products in India

2015 ABB India Ltd wins order worth Rs 256 crore from Ceylon Electricity Board (CEB), Sri Lanka

2016 ABB connects power to the Indian grid from one of the world’s largest solar plants

2016 ABB India doubles solar inverter manufacturing capacity with a new state of the art factory

2016 ABB wins order to supply 1600 transformers to support railway expansion in India.

2017 ABB’s technology ventilates Asia’s longest road tunnel in Jammu & Kashmir

2018 ABB delivers first 110 kilovolt (kV) digital substation to for India’s largest IT park


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date O/S Position Position Change

1 ABB Asea Brown Boveri, Ltd. 30-06-2018 75.00% 158.93M 0

2 Norges Bank Investment Management (NBIM) 31-12-2017 19.96% 42.30M +42.20M

3 Life Insurance Corporation of India 30-06-2018 6.08% 12.88M -0.61M

4 Reliance Nippon Life Asset Management Limited 30-06-2018 3.53% 7.48M +0.00M

5 HDFC Asset Management Co., Ltd. 30-09-2017 3.43% 7.28M +4.16M

6 Aberdeen Standard Investments (Asia) Limited 31-08-2018 1.29% 2.72M 0

7 The Vanguard Group, Inc. 31-08-2018 0.83% 1.76M +0.00M

8 SBI Funds Management Pvt. Ltd. 30-09-2018 0.44% 0.94M +0.50M

9 Sundaram Asset Management Company Limited 31-08-2018 0.38% 0.81M -0.07M

10 Motilal Oswal Asset Management Company Ltd. 31-08-2018 0.20% 0.42M 0

(in %) Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

Promoter 75.0 75.0 75.0 75.0 75.0

FII 3.2 3.1 3.2 3.2 3.2

DII 13.8 13.7 13.5 13.4 13.5

Others 8.1 8.2 8.3 8.4 8.3

Source: Reuters, ICICI Direct Research

Recent Activity

Investor name Value Shares Investor name Value Shares

SBI Funds Management Pvt. Ltd. +9.72M +0.50M Life Insurance Corporation of India -10.42M -0.61M

IDFC Asset Management Company Private Limited +2.47M +0.13M Canara Robeco Asset Management Company Ltd. -7.06M -0.38M

Amundi Hong Kong Limited +0.56M +0.03M DSP Investment Managers Pvt. Ltd. -2.63M -0.14M

BNY Mellon Asset Management North America Corporation +0.16M +0.01M Sundaram Asset Management Company Limited -1.32M -0.07M

ICICI Prudential Asset Management Co. Ltd. +0.10M +0.01M DWS Investment GmbH -1.03M -0.06M

Buys Sells

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | Crore

(| Crore) CY16 CY17 CY18E CY19E

Net Sales 8,648 8,961 10,378 11,819

Operating income - 126 - -

Revenue 8,648 9,087 10,378 11,819

% Growth 6.2 5.1 14.2 13.9

Other income 65.3 121.0 125.0 140.0

Total 8,720 9,213 10,517 11,959

% Growth 6.9 5.7 14.1 13.7

Total Raw Material Costs 5,110 5,352 6,268 7,091

Employee Expenses 768 796 882 969

other expenses 1,517 1,664 1,837 2,080

Total Operating Expenditure 7,902 8,351 9,533 10,751

Operating Profit (EBITDA) 747 736 844 1,068

% Growth 4.8 (1.4) 14.7 26.5

Interest 85 77 85 95

PBDT 727 780 884 1,113

Depreciation 151 158 164 189

PBT before Exceptional Items 576 622 720 924

Total Tax 200 202 238 305

PAT before MI 376 420 483 619

Minority Interest - - - -

PAT 376 420 483 619

% Growth 25.5 11.6 14.9 28.3

EPS 17.8 19.8 22.8 29.2


Cash flow statement | Crore


Profit after Tax 376 420 483 619

Depreciation 151 158 164 189

Interest 85 77 85 95

Cash Flow before WC changes 612 655 732 903

Changes in inventory (1) (213) (126) (178)

Changes in debtors 420 183 (482) (454)

Changes in loans & Advances 681 (6) (1) (4)

Changes in other current assets 75 (154) 1 (65)

Net Increase in Current Assets 745 (789) (607) (700)

Changes in creditors 55 556 130 395

Changes in provisions (72) 3 41 55

Net Inc in Current Liabilities 45 1,433 185 594

Net CF from Operating activities 1,402 1,299 310 797

Changes in deferred tax assets (81) 13 - -

(Purchase)/Sale of Fixed Assets (131) (170) (180) (200)

Net CF from Investing activities (607) (223) (180) (200)

Dividend and Dividend Tax (102) (112) (128) (140)

Net CF from Financing Activities (179) (773) (226) (248)

Net Cash flow 616 302 (97) 350

Opening Cash/Cash Equivalent 574 1,189 1,492 1,395

Closing Cash/ Cash Equivalent 1,189 1,492 1,395 1,745


Balance sheet | Crore


Equity Capital 42.4 42.4 42.4 42.4

Reserve and Surplus 3,244 3,564 3,910 4,377

Total Shareholders funds 3,287 3,607 3,952 4,419

Minority Interest - - - -

Total Debt 604 8 4 4

Total Liabilities 3,891 3,615 3,957 4,423

Gross Block 2,114 2,236 2,407 2,602

Acc: Depreciation 859 1,017 1,181 1,370

Net Block 1,255 1,219 1,226 1,232

Capital WIP 68 116 125 130

Total Fixed Assets 1,323 1,335 1,351 1,362

Non Current Assets 544 596 596 596

Inventory 940 1,154 1,279 1,457

Debtors 2,971 2,788 3,270 3,724

Loans and Advances 19 25 25 29

Other Current Assets 314 468 467 532

Cash 1,189 1,492 1,395 1,745

Total Current Assets 5,865 6,956 7,467 8,517

Current Liabilities 2,157 2,713 2,843 3,238

Provisions 355 357 398 453

Net Current Assets 2,024 1,683 2,009 2,465

Total Assets 3,891 3,615 3,957 4,423


Key ratios

(Year-end March) CY16 CY17 CY18E CY19E

Per Share Data

EPS 17.8 19.8 22.8 29.2

Cash per Share 56.1 70.4 65.8 82.3

BV 155.1 170.2 186.5 208.5

Dividend per share 4.0 4.4 5.0 5.5

Dividend payout ratio 23% 22% 22% 19%

Operating Ratios

EBITDA Margin 8.6 8.1 8.1 9.0

PAT Margin 4.4 4.6 4.7 5.2

Return Ratios

RoE 11.4 11.6 12.2 14.0

RoCE 17.5 23.2 23.9 25.6

RoIC 23.7 41.2 36.8 41.8

Valuation Ratios

EV / EBITDA 35.5 34.8 30.5 23.8

P/E 72.1 64.6 56.2 43.8

EV / Net Sales 3.1 2.8 2.5 2.1

Sales / Equity 2.6 2.5 2.6 2.7

Market Cap / Sales 3.1 3.0 2.6 2.3

Price to Book Value 8.3 7.5 6.9 6.1

Turnover Ratios

Asset turnover 2.6 4.3 4.0 4.4

Debtors Turnover Ratio 2.7 3.2 3.4 3.4

Creditors Turnover Ratio 4.1 3.8 3.7 3.9

Solvency Ratios

Debt / Equity 0.2 0.0 0.0 0.0

Current Ratio 1.4 1.0 1.1 1.2

Quick Ratio 1.1 0.8 0.9 0.9



RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


Disclaimer

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Documents

Rating matrix ABB India (ABB) | 1280content.icicidirect.com/mailimages/IDirect_ABBIndia_Q3CY18.pdf · ABB is witnessing strong visibility across segments. This is due to opex picking-up