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Strong performance across all business areas…

About the stock: ABB India (ABB) is a leader in technology solutions by connecting software to its electrification, robotics, automation and motion portfolio.

* It operates mainly three key segments including robotics & motion (41%), electrification (38%), industrial/ process automation (22%)

* Well placed to gain from the overall energy market transformation from electrification to automation & digitisation

Q3CY21 Results: ABB reported strong Q3CY21* results amid disruptions.

* Revenue at | 1778.4 crore, up 10.3% YoY amid strong execution

* EBITDA came in at | 168.9 crore with margins of 9.5% supported by controlled employee expenses, gross margins improvement

* Consequently, PAT came in at | 119.9 crore, up 48.5% on a YoY basis

* Order inflows for Q3CY21 came in strong at ~| 1909 crore, up 46% YoY

What should investors do? Overall, further penetration of automation & digitisation products and services across segments to drive long term growth.

* We remain long term positive and retain our BUY rating on the stock

Target Price and Valuation: We value ABB at | 2310 (65x on CY23E EPS).

Key triggers for future price performance:

* It expects operating margins to improve with increase in capacity utilisation, change in revenue mix, cost optimisation programmes and localisation

* ABB continues to see a recovery in certain segments and industries like datacentre, renewables, electronics, food & beverages and pharma. While it continues to focus on order win and seamless execution across projects

* Expect revenue, EBITDA to grow at CAGR of ~18.8%, 28.5%, respectively, in CY21E-23E due to strong traction in short cycle products and services

Alternate Stock Idea: We also like Siemens Ltd in our coverage.

* Further penetration of valued added automation and digitisation products & services across segments to drive margins, long term growth

* BUY with target price of | 2550

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