ABB India earnings preview: Robust growth across segments to drive revenue

Analysts will be watching out for order inflows from transmission, railways, data center as well as increase in private capex.

Engineering major ABB India which is scheduled to report its Q2CY24 earnings on August 8, is expected to report a strong quarter based on robust growth in electrification, automation and motion.

ABB India is expected to report a 22 percent YoY increase in net revenue in the quarter ending June 2024 to around Rs 3,070 crore, as per the average estimates of five brokerage firms. While most analysts are positive on a year-on-year basis, Kotak Institutional Equities analysts also estimate a qoq decline in revenues, impacted by a high base ( due to a spillover of sales from the prior quarter).

On the other hand, net profit is expected to increase around 35 percent YoY to around Rs 455.8 crore in Q2CY24.

ABB India's stock price has gained around 66 percent over the last one year and around 503.5 percent over the last five years.

Factors impacting earnings?

Currently, around 10 brokerages have a buy call on the stock, 9 have a hold call and 9 have a sell call.

Here are some of the factors analysts expect to impact earnings.

Strong order book:
Analysts expect revenue to grow 27 percent YoY, driven by strong order book. The brokerage notes that demand continues to be healthy, which will reflect in order inflows.

Margin to expand on improved product mix:

Most analysts expect margin to expand due to improved product mix and share of services and operating leverage. Analysts expect the margin to expand between 350 and 420 basis points YoY.  Analysts at Kotak Institutional Equities expect a sequential contraction in EBITDA margin to reflect the normalisation of boost from raw material prices. "In our assessment, the boost to margin from structural factors (such as an increase in share of energy efficient motors and drives) is much lower than the quantum of improvement in margin in recent quarters," the report notes, adding that key commodity prices in copper, aluminum
and steel have been volatile which could impact the motion segment margin.

Things to watch out for

Analysts will be watching out for order inflows from transmission, railways, data centre as well as an increase in private capex. They will also be watching out for management commentary on commodity costs will be key monitorables, analysts at Prabhudas Liladher say.

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