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ABB India reported a strong beat on expectations. Net sales were up 23% YoY (10% above JMFe), while EBITDA reported strong growth of 52% YoY (15% above JMFe). Sales growth largely came from Electrification (EL) and Motion (MO) segment, leveraging its robust order book and execution. Revenue in EL segment grew by 16% YoY, given its robust backlog, additionally MO segment growth was led by a resurgent traction converter business, growing 36% YoY. Process Automation (PA) grew by 23% YoY, given milestone-based execution of project orders. Operating margins were 60bps higher than expectations at 11.8% (+230bps YoY), on account of better capacity utilisation and favourable mix. Order inflows are up 36% YoY at INR31.3bn, led by robust order inflows across segments, while OB stood INR71.7bn (0.8x TTM sales), +37% YoY. We remain positive on the growth story given a) expansion in lower tier cities to pace up the growth, b) utilisation of robust cash balance (c.INR40bn) for organic and inorganic acquisitions and c) improvement in margins over the past few quarters to c.12% (1QCY23) vs average range of 6-8% in CY18-20. Further, ABB Global reported healthy order inflows growth (+9% YoY on a comparable base) and anticipates growth of 10% in CY23 with improvement in EBITDA margins. We maintain BUY rating with revised TP of INR4,100, based on 65x CY24E EPS.

* Healthy growth across segments: Net sales were up 23% YoY to INR 24.1bn. The growth was led by electrification products (+16% YoY), motion segment (+36% YoY) followed by process automation reporting growth of 23% YoY. Robotics reported growth of 4% YoY. Management highlighted that the company is witnessing strong growth across segments and with a healthy order backlog is expected to sustain growth. Largest backlog build up is in PA, followed by MO and EL segments.

* Healthy product mix with improvement in price realisation, led to healthy margins: Gross margins improved significantly by 230bps YoY to 36.3%, while operational efficiencies like decline in staff expenses by 120bps YoY to 7.8% (8.9% in 1QCY22) aided in EBITDA margin expansion of 230 bps. EBITDA reported robust growth of 52% YoY and came in at INR2.9bn, 15% above JMFe. Segment wise, all the segment reported margins expansion. Other income grew by 94% YoY at INR723mn, led by better cash balance, which stood at INR39.4bn. Adj net profit came in at INR 2.5bn, up 70% YoY.

* Inflow pace improved: Order inflows saw an improvement of 36% YoY to INR 31.3bn, led by orders in materials, utility, renewables and railways. Order backlog stood at INR 71.7bn (0.8x TTM sales), outpacing sales growth. Process Automation reported flat growth YoY in order inflows, EL segment was up by 44% compared to 1Q22, due to strong customer connect. MO segment orders were up 37% YoY, to INR 12.2bn.

* Maintain BUY with TP of INR4,100: Management expects continuity in order inflows on the back of government spends on projects incentivizing local production and fast tracking infrastructure projects. We forecast 21%/32% CAGR in sales/adj PAT over CY22- 24E. We maintain BUY with revised TP of INR 4,100, based on 65x Dec’24E EPS. Key risk: Deferment of private sector capex.

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