Hold ABB India; target of Rs 2293: Prabhudas Lilladher

Prabhudas Lilladher's research report on ABB India

ABB India (ABB) reported strong quarterly performance led by strong order book execution in Electrifications and Motions segment, price pass through, volume growth and order inflow uptick in exports as well as service business. Order inflows came in at Rs22.9bn (up 26% YoY), translating to order book of ~Rs52bn. Demand scenario continues to remain robust along with strong enquiry pipeline, thereby providing good order inflow visibility. Segments such as renewables, water & wastewater, warehouse logistics, Electronics, F&B, data center, railway, metro etc. will likely be key growth drivers in the medium term. We believe ABB’s 1) strong business model, 2) healthy global distribution network, 3) strong exports demand, 4) diversified business portfolio and 5) focus on high growth segments, margin improvement and organic as well as inorganic expansion will augur well in the long run. Given robust enquiry pipeline, increasing share of short cycle orders, penetration in Tier II & 3 markets and focus on operational efficiency, we have revised our earnings estimate upwards by 2.7%/3.8% for CY22/CY23.

Outlook

Stock is trading at 83.2x/63x CY22/CY23E. We maintain ‘Hold’ rating on stock with revised TP of Rs2,293 (earlier Rs2,209) valuing it at PE of 65x CY23E.