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ABB India (ABB) has reported another (after having reported bumper Q1CY23) superlative set of earnings in Q2CY23 with 22% YoY growth in revenue, 75% YoY growth in EBITDA led by 420bps YoY expansion in margin and 101% YoY increase in profit. Order inflow in Q2 grew 10% YoY – a muted number but came on a very high base (base quarter grew 64% YoY). During Q2, it also expanded its motor drives portfolio in India with new manufacturing lines. Note ABB had shed its high voltage portfolio in 2016 and has enhanced its portfolio catering to new and emerging industries. Besides, the margins have improved from 10% over the last four quarters. The growth print has been impressive since last nine quarters. The stock is trading at 60xFY25 earnings. Maintain ADD with TP of INR 4,920.

A superlative set of result

ABB’s revenue grew 22% YoY to INR 25bn. EBITDA margin came in at 13.9% (+420 bps YoY and +210 bps QoQ). As a result, EBITDA grew 75% YoY to INR 3.5bn. Profit grew 101% YoY to INR 3bn.

Order inflow and order backlog

Order inflow grew 10% YoY to INR 30.4bn while order backlog grew 29% YoY to INR 78bn. The growth is explained by a strong inflow in CY22 of 31% YoY and 36% growth in C1FY23.

Cash utilisation

ABB is looking to use the cash for organic and inorganic opportunities. It highlighted that ABB Global is also looking at India to serve its needs. The company has declared a special dividend of INR 5.5 per share.

Opportunities from locomotives and semi-high speed trains

ABB is in talk with various winners of semi-high speed train set to figure out the addressable opportunities in terms of traction motors and traction converters.

Maintain ADD with revised TP of INR 4,920

We continue to believe ABB is best positioned to cater to new expanding addressable opportunities emerging from a host of segments – electrification, renewables, automation, efficiency and high speed mobility.

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