Accumulate ABB India; target of Rs 5013: Prabhudas Lilladher

Prabhudas Lilladher's research report on ABB India

We revise our estimated for CY23/24/25E by 9.5%/11.3%/11.7%, factoring in strong domestic demand outlook, favorable product mix, better price realizations, increasing adoption of ABB’s energy efficient products and sourcing by parent from ABB India to serve exports markets. ABB India (ABB) reported a robust quarterly performance, with revenue growth of 22.2% YoY and EBITDA margin expansion of 422bps YoY to 13.9%. Demand from core sectors (Cement, Metal, mining etc), high growth sector (food & beverages, pharma, automotive, water etc.) and new initiatives (data centers, railways, renewables etc) to propel stronger growth in medium term. Strong growth witnessed in short cycle orders across segments, coupled with increasing distribution reach (tier2/3 cities) fueled LV/MV product growth leading to better volumes and strong operating leverage playing in.

Outlook

We remain positive on ABB given 1) increasing traction for energy efficient products, 2) changing customer preference towards value added products, 3) ABB’s diversified business model, 4) focus on high growth segments (Electronics, Data center etc), 4) strong order pipeline 5) organic/inorganic growth. The stock is trading at PE of 90.5x/73.5x/61.2x CY23/24/25E. We roll forward to CY25 estimates and maintain ‘Accumulate’ rating on stock with revised TP of Rs5,013 (Rs4,119 earlier), valuing it at 68x CY’25E (same as earlier).