So much for "big is beautiful", it is not the sheer size that is decisive for a company these days, but rather the specialization in high-growth and highly profitable segments. This is a maxim that Björn Rosengren imposed on ABB when he took office almost two years ago. On the one hand, the electronics group is to shrink healthily and divest peripheral areas. On the other hand, promising divisions such as the robotics business, in which ABB is the world's number two, are to be strengthened further with acquisitions. Ultimately, Rosengren, a former navy officer, wants to concentrate on the areas of electrification and automation in order to be at the forefront of as many megatrends as possible in the future.
The financial market has confidence in the native Swede: Since taking the scepter in March 2020, ABB shares have risen by two-thirds, more than twice as much as the overall market. The latest business figures for 2021 underline the positive stock market trend. Despite the well-known material bottlenecks and logistics difficulties, the group managed to increase sales by 11% to USD 28.95 billion. Progress was also made on the earnings side: the operating margin increased markedly from 11.1% to 14.2%. However, Rosengren, who is known as a reorganizer, is not yet satisfied with this. In the course of efficiency increases, the return on investment is to improve further this year and then reach at least 15% from 2023.
A glance at ABB's order book alone shows that the signs point to further growth in the coming months. Order intake soared by a fifth to USD 31.87 billion. "We see demand continuing at this tremendous level, and we see a strong year ahead," Rosengren enthused at the recent presentation of the 2021 financial statements. However, turning the many orders into sales will require an end to the bottlenecks in the supply chains. In this regard, the CEO is also confident: "In the second half of the year, this problem should then be solved."
In addition to its day-to-day business, ABB is also continuing to press ahead with restructuring in the current year. While the turbocharger business has been put in the shop window, the turbo charging unit is to be taken public in the second quarter. However, the company intends to retain a majority stake in the promising business. The proceeds from the transaction, estimated at around a quarter of a billion dollars, will be used to further strengthen this area through acquisitions. ABB already expanded its division with charging technology for electric cars with an acquisition a few weeks ago. To this end, the stake in InCharge Energy was increased to 60% from one-tenth.
The US company, which was only founded in 2018, specializes in charging infrastructure, services and software for commercial e-fleets. The deal is a smart move by ABB, as the business is getting government support. USD 7.5 billion is to be injected into the expansion of the charging network as part of President Joe Biden's infrastructure program.
Due to the strong increase in the share price in recent months - compared to its competitor Siemens, ABB shares outperformed by more than 20 percentage points over a one-year period - the valuation of the SMI stock has also become more expensive. With a price-earnings ratio of around 20, the value - at similar growth rates - is about 5 points higher than that of its German competitor. It is therefore not surprising that analysts see only limited upside potential for ABB, with an average price target of CHF 35.47.
The new Softcallable Barrier Reverse Convertible already allows for an attractive yield in a sideways movement. And this despite the fact that the product comes with conditional partial protection. With a maximum term of one and a half years - the first softcall observation day takes place after 6 months - the BRC holds an attractive coupon of 6.60% p.a.. In order to achieve the maximum return, the ABB share may take it more leisurely in the future. It is important that the underlying does not touch the barrier at 69% of the initial level.
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