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Our view

ABB India Ltd (ABB) reported a robust quarterly performance, led by execution pickup across segments. With a favourable product mix, higher service income and operating leverage, the company was able to expand its margins by ~420bps YoY. Order Inflow growth of 10% YoY despite low single digit growth for the base orders. This was driven by double digit growth in Electrification and Process Automation while Robotics saw moderate flows on a low base. A strong operational performance and higher other income led to doubling of PAT YoY.

Looking forward

Given the company’s prowess in high-end cutting-edge solutions, focus on innovation, deeper penetration in the domestic market, strong support from the parent and increasing localization, ABB is a key beneficiary of the pickup in the capex cycle. The stock is currently trading at a PE of 87x/70x CY23E/CY24E. Penciling in richer margin profile and robust business outlook, we increase our CY23E/CY24E EPS estimates by 17%/27% respectively. We upgrade it to NEUTRAL (from REDUCE) with a revised TP of Rs4,539 valuing it at 70x CY24 EPS of Rs65 as we are of the view that the stock is richly valued at current levels.

Result Highlights

* Sales came in at ~Rs25.1bn (up 22% YoY) (YSLe: Rs25bn) led by growth across segments where Robotics/Electrification/Industrial Automation/Motion business grew by 154%/10%/20%/38% YoY

* EBITDA was up 75% YoY at Rs3.5bn (YSLe: Rs3.1bn) while margins came at 13.9% vs 9.7% in 2QCY22; beating our estimates owing to operating leverage benefits

* PBT grew by 101% YoY to Rs3.9bn largely owing to higher other income (up 196% YoY)

* Consequently, PAT after continuing operations came in at Rs2.9bn vs Rs1.5bn in 2QCY22

* Order inflows came in at Rs30.4bn, up 10% YoY. Order book stands comfortable at Rs77.3bn (0.8x TTM revenues)

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