Buy ABB India; target of Rs 6851 Prabhudas Lilladher

Prabhudas Lilladher's research report on ABB India

We revised our EPS estimates for CY25/CY26 by -1.5%/-1.5% factoring in executing delays in Process Automation. ABB India (ABB) reported quarterly performance with modest revenue growth of 2.6% YoY with flattish EBITDA margin of 18.4%. During the quarter, the growth was led by strong momentum across all segments except in Process automation which was impacted by a change in delivery schedule. Order book pipeline remains robust seeing strong traction from fast growing diverse business segments, such as Data Center, Electronics and Renewables along with traction equipment like propulsion systems and traction motors for rail & metro. Management’s efforts for expanding in Tier-2 and Tier-3 cities are yielding results while the base order intake is projected to sustain at ~Rs35bn per quarter. Going forward, management continues to guide for the PAT margin of 12-15% (15.4% in CY24) with a strategic focus on consumption, investments, premiumization and global uncertainties.

Outlook

We remain positive on ABB given 1) increasing traction for energy efficient and premium quality products, 2) resilient business model, 3) focus on high-growth areas such as data centers, rail & metro, renewables and electronics, and 4) strong domestic order pipeline. The stock is trading at a P/E of 58.8x/51.4x CY25/26E. We maintain ‘Buy’ rating with a revised TP of Rs6,851 (Rs6,955 earlier) valuing the stock at a PE of 63x CY26E (same as earlier).