HDFC Securities' research report on ABB India
ABB’s reported decent revenue/EBITDA/PAT at INR 24.1/2.9/2.5bn, beating/(missing) our estimates by 3/ (12)/ (7)%. For Q1CY23, order inflow (OI) was INR 31.2bn, supported by higher-order wins in Motion and Electrification segments. Consequently, the order backlog stands at INR 71.7bn consisting mainly of shortcycle orders. Of the new orders received in the quarter, 80% are fast-moving industrial goods, 13% pertain to service-related orders and the rest 7% are projectbased orders which generally have a long gestation period. The overall EBITDA margin at 11.8% normalised to its long-term value. However, the electrification segment saw a strong EBIT margin of 19.5% (+416/+576bps QoQ/YoY), supported by higher volume growth, better product mix and price realisation and efficient capacity utilisation. The cash balance stands strong at INR 39bn, a part of which is earmarked for inorganic growth, in line with global strategy, targeting small and medium firms across the globe, and another part for capacity expansion and plant modernisation.
Outlook
We have increased our EPS estimate for CY23/24 on the back of better order visibility on account of secular demand across segments and a favourable mix. However, we believe the punchy valuation would limit further upside on cyclical recovery and, thus, maintain REDUCE with an increased TP of INR 3,444/sh (54x Mar-25 EPS).
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