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Another strong performance…

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

* It operates in 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

Q2CY22 Results: ABB reported another strong quarter with Q2CY22* results.

*  Revenue at | 2052.5 crore, grew 44% YoY, owing to better execution and value added volume mix

* EBITDA came in at | 198.9 crore with margins of 9.7%. Margin growth was supported by quality execution

 * Hence, PAT came in at | 147.1 crore, up 109.3% YoY

* Order inflows for Q2CY22 came pretty strong at ~| 2767 crore, up 64% 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 | 3275 (75x 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 recovery in certain segments and industries like datacentre, renewables, electronics, food & beverages and pharma. It continues to focus on order win and seamless execution across projects

* Expect revenue, EBITDA to grow at CAGR of ~25.2%, 41.8%, 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 | 3040

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