Long Legrand / short ABB idea for long / short investors
- 1. Long Legrand (LR FP) / Short ABB (ABBN SW) 15% upside / we think with low risk Jan 2025 Mathias Lascar [email protected] +44 207 290 27 60
- 2. Trading idea in a nutshell • We see the long LR FP / short ABBN SW as a low risk long / short with a 15- 20% upside if premium of ABB to LR tightens back • ABB is trading at x close to its highs, unlike LR FP • We feel top line growth risks on ABB are higher than at LR • On a relative value, LR FP vs ABB SW is trading at a level unseen in the last 10 years, after a 47% underperformance since 2019
- 3. LR vs ABB LR ABB Winner 17% of sales to strong growing data centers in 2024 15% of order intake in electrification division to data centers Draw 36% of sales related fast expanding segments 45% of sales done by Electrification division ABB slight advantage 40% of sales related to residential (of which around half is less cyclical renovation) 12% of sales to robotics and automation We see uptick in residential construction in 2025 with lower interest rates (especially in Europe) while robotics will suffer at least until H2 2025 LR wins Achievable guidance of strategic plan 2025 / 2030 3% organic growth per annum is achievable almost only with 10% growth on data center sales p.a … ABB reduced its organic growth target for Q4 2024 due to deteriorating demand outside of electrification LR wins
- 4. ABBs problems lie with robotics and automation % of sales 2022 2023 9m/24 lfl growth Q3/24 lfl growth Electrification 46.0% 45.1% 8% 10% Motion 22.8% 24.2% -2% 1% Process Automation 20.4% 19.4% 10% 6% Robotics and Automation 10.8% 11.3% -12% -20%
- 5. Valuation metrics FREE_CASH_FLOW_YIELD BEST_EV_TO_BEST_EBITDA BEST_PE_RATIO BEST_CUR_EV_TO_EBITDA LR FP Equity 4.54544 13.41875 19.15217 13.64713 ABBN SW Equity 4.10746 15.14004 18.22007 15.36201 • Current valuations show a discount of LR to ABB • Longer term valuation metrics show LR can trade at higher x to ABB Date de début 01/01/2020 Date de fin LR FP Equity ABBN SW Equity Enterprise Value/EBITDA Adjusted Enterprise Value/EBITDA Adjusted Dates EV_EBITDA_ADJUSTED EV_EBITDA_ADJUSTED 31/03/2020 12.0446 14.3499 30/06/2020 15.0166 16.7102 30/09/2020 14.6146 13.3637 31/12/2020 15.2383 13.783 31/03/2021 15.2709 13.8591 30/06/2021 15.3942 13.9777 30/09/2021 16.0592 14.8111 31/12/2021 17.7809 16.0238 31/03/2022 14.8406 14.2013 30/06/2022 12.1908 12.2653 30/09/2022 11.0706 11.4594 30/12/2022 11.0706 11.4594 31/12/2022 11.6754 12.2568 31/03/2023 12.4288 13.145 30/06/2023 12.995 14.0463 29/09/2023 12.995 14.0463 30/09/2023 12.3685 12.3531 29/12/2023 12.3685 12.3531 31/12/2023 12.9095 14.5685 29/03/2024 12.9095 14.5685 31/03/2024 13.98 14.8985 28/06/2024 13.98 14.8985 30/06/2024 13.8552 17.353 30/09/2024 15.151 17.6421 31/12/2024 15.151 17.6421 30/06/2021 16.715 14.809 30/09/2021 17.266 15.156 31/12/2021 17.266 15.931 31/03/2022 17.266 14.885 30/06/2022 11.169 12.065 30/09/2022 10.596 12.231 30/12/2022 11.598 13.964 31/03/2023 14.136 15.961 30/06/2023 14.285 16.65 29/09/2023 13.367 13.807 29/12/2023 14.568 15.6 29/03/2024 15.513 16.222 28/06/2024 16.265 18.056 30/09/2024 17.434 18.624 31/12/2024 16.229 17.836
- 6. LR forward looking PEs past 5 years
- 7. ABB forward looking PEs past 5 years
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