Buy ABB; target of Rs 1030: Motilal Oswal

Motilal Oswal 's research report on ABB

ABB's 3QCY20 revenue growth decline was limited to 8% (v/s est. 14% decline). The company demonstrated strong cost-control measures, leading to flat EBITDA YoY (almost double our est.) - a commendable effort, implying higher resilience to revenue decline. The company has suggested that ~85% of the previous year's demand is back in the system. However, order inflow declined 19% YoY, largely attributable to the Electrification and Industrial Automation segments. ABB is a pure-play on longer-term industrial automation and the 'Make-in-India' theme. We have largely maintained our CY21E/CY22E estimates. While decline in order inflow remains a concern, we expect quick recovery in short-cycle businesses. We maintain our Buy rating, with unchanged TP of INR1,030.

Outlook

We maintain our Buy rating, with TP of INR1,030 based on an unchanged Mar'22E target PE multiple of 45x (at par with our target multiple for pure automation businesses and as justified by DCF, as well as a min ~1-year forward PE multiple for ABB over the past 10 years).

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