In its recent annual report, ABB India Ltd. stressed upon its emphasis towards its potential high-growth segments, expanding further into Tier 2 cities, as well as development of new products.
Domestic brokerage Motilal Oswal reiterated its ‘buy’ recommendation on ABB India shares, with a target price of Rs 6,700, indicating a 28 percent upside.
Motilal Oswal anticipates that ABB will be better positioned than its peers, given its 50 percent exposure to high and moderate growth segments. The company also has stronger control over margins through cost efficiencies, which will help mitigate any potential decline in gross margins in the future.
Additionally, ABB is well-placed to benefit more from exports, as it is increasingly the preferred choice for group companies in this area, noted the brokerage.
During this year, ABB India continued to capitalize on the demand for premium products and increased penetration into Tier 2 and Tier 3 cities. ABB also saw a strong potential in sectors such as chemicals, pharmaceuticals, automotive, power distribution, water, electronics, and data centers. All of these are expected to draw in steady investments, while also considering the global geopolitical situation.
ABB’s ordering in CY24 was lower than predictions, and a near-term impact may be observed on overall ordering due to a slowdown in capex activity. However, with the company maintaining its focus on high-growth segments, a boost is anticipated in inflows and execution after a few quarters.
ABB has grown its revenue at a 20 percent CAGR over the last five years and has doubled its profits over the past four years. ABB’s order inflow grew by 6.2 percent in CY24, although this was affected by temporary softening in government and private capital expenditures.
From CY20 to CY24, ABB’s gross margin increased by 830 basis points, fueled by the advantages of localization, a more favorable product mix, and better pricing.
Its incurred capex stood at Rs 210 crores during the year, which was directed towards the upgrade and expansion
The stock has recently corrected to reflect this temporary weakness, cracking 38 percent over the past six months.
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