Hold ABB; target of Rs 880: Prabhudas Lilladher

Prabhudas Lilladher's research report on ABB

ABB India (ABB) reported decent performance in challenging times led by strong focus on execution of OB, cost rationalization initiatives and higher other income. During the quarter Motion division grew by 4% YoY led by conversion of backlog orders in all major segments, while other segments reported de-growth. Order inflow came in at Rs13bn, down 19% YoY owing to uncertainty in the economic environment and delay in decision making cycles. Sectors like electrical distribution, transport, data centers, consumer electronics, pharmaceuticals and food & beverage continue to show healthy growth. Outstanding order remained subdued at Rs44bn providing revenue visibility for few quarters. Management believes that impact of Covid-19 would continue in the short term as pandemic situation is yet to settle-down. Considering the adverse impact of pandemic on the economy and uncertain business conditions we believe maintaining consistent growth in order inflow will remain challenging.

Outlook

We expect gradual recovery as impact of pandemic remains uncertain. In the long run, we believe ABB’s resilient business model, healthy global distribution network, diversified business segment and comfortable balance sheet would benefit the company from recovery, once economic activity starts picking up. The stock is currently trading at 45.7x/41.5x CY21E/CY22E. We maintain Hold rating with TP of Rs880.