Citigroup - ABB

Citigroup in their report on ABB are positive on its prospects

Raise target price to Rs5,516 — We increase our target price to Rs5,516 (from Rs4,400 earlier) on the back of an earnings revision and rolling forward our P/E multiple (30x) to FY09E. We now expect earnings CAGR of 42% over the CY06- 09E with RoEs at the ~35% levels driven by sales CAGR of 40%.

At a ~ 50% premium to BHEL — Our target price of Rs5,516 is based on a P/E of 30x FY09E (~50% premium to BHEL, in line with premium over the last 3 yrs). The premium is justified by: A) EPS CAGR of 42%; B) RoEs of ~ 35%; C)Access to parent technology; and D) ABB India’s importance in the ABB Group.

Earnings revised upwards — Raising our EPS estimates by 2-5% over CY07ECY09E on the back of: 1) Better-than-expected sales, profit & order inflow in 1QCY07; 2) In the next 10 years, India is targetting 151GW of capacity up 86% vis-à-vis the last 10 years; and 3) India is also targetting a transmission capex of Rs550bn in the next five years up 157% vis-à-vis the previous 5 years.