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Citi reiterates BUY on ABB India

February 19, 2007

Citigroup Research in its report on ABB has reiterated a BUY with Low Risk and has set a price target of Rs 4,400, 16% upside from current levels.

ANN (India) reported a 4QCY06 PAT at Rs1.35bn (up 43% YoY) was 7% ahead of estimate of Rs1.26bn on faster execution of orders leading to net sales of Rs14.3bn, which was 5% ahead of estimates.

ABB (India) booked Rs14.1bn (up 40% YoY) of fresh orders in 4QCY06, ending the year with an order backlog of Rs33.7bn (up 60% YoY). In CY06, the company booked orders worth Rs56.2bn (up 50% YoY). Strong industrial growth and power capex imply future order inflows.

The power capex cycle will be stronger for longer as the first concrete numbers of the Ministry of Power’s (MoP) generation targets for the XIIth Plan (FY12-17E) at 86.5GW has started trickling in, implying that capacity addition targets in the 10 years from FY07E-FY17E is likely to be 153.5GW.

Target price of Rs4,400 is based on a P/E of 34x FY08E which is a ~50% premium to BHEL, in line with the premium over the last 3 years.

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