ABB: Order book-driven

Contracts worth Rs 4901 crore allow the company to pass on higher input costs to customers.

ABB once again reported a strong quarterly performance thanks to no signs of weakening in the power capex cycle.

Its operating profit grew 55.9 per cent y-o-y to Rs 172.4 crore in the September quarter, while its net sales improved 28.7 per cent to Rs 1377.54 crore.

The operating profit margin also improved 220 basis points y-o-y to 12.5 per cent in the last quarter. The stock declined 1.4 per cent to Rs 1433.6 on Thursday.

However, a month prior to the declaration of its quarterly results, the stock had risen 11 per cent compared to a 10 per cent gain in the Sensex.
In the June 2007 quarter too, its operating profit margin grew 120 basis points y-o-y to 11.7 per cent.

Meanwhile, the company's order intake in the September quarter was Rs 1668.3 crore, a growth of 23 per cent y-o-y. Prominent orders include a Rs 93 crore contract from Germany-based KHD Humboldt Wedag.

The company's adjusted raw material costs as a percentage of net sales remained more or less flat on a y-o-y basis at 67.6 per cent in the September 2007 quarter despite higher costs of inputs such as steel and copper. ABB's contracts allow it to pass on higher input costs to its customers, point out analysts.

ABB's growth will be powered by its outstanding order book of Rs 4901.1 crore. The stock trades at 55 times estimated CY07 earnings and 38 times estimated CY08 earnings, given the growth potential in the sector.

NDTV: In for a long haul

Despite posting a strong top line growth of 32 per cent in the September quarter, broadcaster NDTV turned in a loss of Rs 16.6 crore and a net loss (pre-ESOP) of Rs 22.7 crore.

The operating margin saw a negative swing of 1200 basis points despite NDTV Profit breaking even during the quarter.

While the news operations have done well after a muted performance in the last three quarters, expenses rose a sharp 53 per cent thanks to investments in four new channels including the lifestyle channel NDTV Good Times and Metronation Delhi.

While NDTV may continue to see a reasonably good growth in the top line given improving subscription and advertising revenues, the new channels will continue to be a drag on the company's performance till their operations stabilise.

The broadcaster plans to roll out another two channels in the near future "" a Hindi general entertainment channel in January 2008 and another lifestyle channel.

NDTV's strategy of straddling genres and having a presence on the internet, media process outsourcing and global consulting should pay off in the long term.

In the immediate future, however, the business will continue to be under pressure as costs continue to rise even though the company has mopped up about Rs 500 crore to fund its new initiatives.

Moreover, competition across channels is intensifying as new broadcasting houses emerge and existing firms roll out new channels. At the last count there were nearly a 100 channels being planned.

Besides, with the medium becoming extremely fragmented, channels will find it difficult to garner advertising revenues though the increase in subscriptions should be a compensating factor.

The stock has underperformed the market by about 30 per cent over the last three months or so and the valuations continue to remain demanding.

With contributions from Amriteshwar Mathur, Shobhana Subramanian and Priya Kansara