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Robust execution; order book provides comfort

Our view

ABB India Ltd (ABB) reported a healthy quarterly performance, led by execution pickup across segments. With easing commodity prices, the company was able to expand its margins led by price hikes and a favourable product mix. On the back of recovery in economic activity and uptick in private capex cycle, the company reported strong quarterly order inflows of Rs26.3bn (up 38% YoY) spread across verticals. As on 3QCY22 order book stands at ~Rs65.2bn (0.8x TTM revenue), providing revenue visibility for next few quarters.  Going forward the company expects good traction from oil & gas, cement, steel, data centres, etc.  

We believe ABB’s strong business model, healthy global distribution network, diversified business portfolio and strong cash position (Rs32bn) would benefit the company as economic activity starts ramping up. The stock is currently trading at PE of 87x/68x CY23E/CY24E. We upgrade it to NEUTRAL (previously REDUCE) with a revised TP of Rs3,122 valuing it at 70x CY24 EPS of Rs44.6.

Result Highlights

* Sales came in at ~Rs21bn (up 19% YoY) (YSL estimates ~Rs22bn) led by growth across segments where Electricals/Industrial Automation/Motion business grew by 27%/3%/26% YoY

* EBITDA was up 25% YoY at Rs2.1bn while margins came at 10% v/s 9.5% in 3QCY21 led by better capacity utilization and operational efficiencies

* Adj PBT grew 39% YoY to Rs2.3bn owing to higher other income

* PAT after continued operation came in at Rs1.7bn Vs Rs1.2bn in 3QCY21

* Order Inflows came in healthy at Rs26.3bn, up 38% YoY. Order book stands comfortable at Rs65.2bn (0.8x TTM revenues)

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