Buy ABB India; target of Rs 8500: Motilal Oswal

Motilal Oswal's research report on ABB India

ABB India (ABB)’s 3QCY24 performance was below our expectations due to lower-than-expected order inflows and execution. The quarter was hit by the changing mix of order book towards a higher share of long-gestation, large-sized orders. Margin performance, though, remained strong YoY, with improved pricing and lower RM costs. We expect the near-term execution velocity to be affected by slower-than-expected growth in order inflows and a shift of order book towards longer-gestation projects. However, with higher value-added content in large-sized order inflows, we expect margin performance to remain healthy. Order inflow growth across segments, except Electrification, was hit by decision delays from the private sector and high base in select segments. We cut our estimates by 9%/10%/11% for CY24E/CY25E/ CY26E to factor in 9MCY24 performance and the near-term impact on execution due to the longer execution cycle of orders. Our revised TP stands at INR8,500 (vs. INR9,500 earlier), implying 72x P/E on Dec’26E EPS. We continue to maintain our positive stance on ABB based on its ability to benefit from the high growth segments with its wide offerings and deeper penetration network. Reiterate BUY.

Outlook

We reiterate our BUY rating with a DCF-based TP of INR8,500, implying a multiple of 72x P/E on Dec’26E EPS.