Accumulate ABB India; target of Rs 5329: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on ABB India with a target price of Rs 5329 in its research report dated February 21, 2024.

Broker Research

February 22, 2024 / 12:50 IST

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Prabhudas Lilladher's research report on ABB India

We revise our CY24/25E EPS estimates by +3.4%/7.6% factoring in continued strong domestic demand and premiumization. ABB India (ABB) reported healthy quarterly performance with revenue growing 13.6% YoY and EBITDA margin rising by 12bps YoY to 15.1%. Domestic market is expanding faster than exports due to better investment momentum. Contributions from new segments such as data centers, rail & metro, renewables, and electronics may be small but are growing rapidly with high order inflows. Meanwhile, ‘lowgrowth’ core sectors such as cement, oil gas, metals, ports, etc. which contribute significantly to the order book have been muted but are gradually picking up momentum. Despite growing traction in large long-cycle projects, we expect margins to remain steady on the back of improving mix, continued premiumization, and better pricing & capacity utilization. We remain positive on ABB given 1) increasing traction for energy efficient products, 2) changing customer preference towards premium quality products, 3) diversified business model, 4) focus on high growth segments such as Data Centers, Electronics, Rail & Metro, Renewables, etc., and 5) strong domestic order pipeline. The stock is trading at a P/E of 72.2x/60.8x CY24/25E.

Outlook

We maintain ‘Accumulate’ rating with a revised TP of Rs5,329 (Rs4,950 earlier) valuing it at a P/E of 65x CY25 (same as earlier).

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