Motilal Oswal 's research report on ABB
Despite strong impact of the COVID-19 disruption on short duration businesses, ABB’s 2QCY20 revenue growth decline was limited to 43% (v/s est. 57% decline). The company demonstrated strong cost control measures, which led to positive EBITDA/adj. PAT (v/s est. loss). This suggests that ABB has a highly resilient business model. Importantly, the company has suggested that Jun-Jul’20 marked double-digit YoY growth in order inflows/revenue. ABB’s results indicate trends that boost our structural industrial automation theme – not only have clients experienced the benefits from close quarters, but the company has also used automation (remote monitoring, etc.) to service clients at lower costs. While we are impressed with green-shoots in the automation business, we await more data points to emerge – expect confirmation of the same through Siemens’ results. We have increased our CY20/CY21E earnings estimates by 12%/6% and see an upside risk to the same, if the Jun-Jul’20 trend persists.
ABB is a pure play on longer-term industrial automation and the ‘Make-in-India’ theme. We maintain our Buy rating with revised TP of INR1,030 (Prior: INR990).
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