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Margin drag persists amid QCO & competition Quick Pointers:

* Management expects the Quality Control Order (QCO) impact on profitability to remain for at least next 3-4 more quarters.

* Base order inflow increased 12.5% YoY to Rs30.6bn, while large orders declined by 72.1% YoY Rs1.7bn.

We cut our EPS estimates for CY26/CY27E by -5.2%/-2.6% and factoring in QCO related higher raw material imports pressurizing margins and loss of ABB’s pricing power amid heightened competition. ABB India (ABB) reported 13.7% YoY revenue growth, while EBITDA margin contracted by 344bps YoY to 15.1%. Large order bookings continued to face delays amid prolonged decisionmaking cycles, while Chinese competition remained intense primarily across Electrification and Motion segments. Margins were further impacted by higher imported raw material costs due to QCO compliance, with normalization expected over the next 3–4 quarters. The company continues to witness traction from data centers, electronics, and rising investments in process industries. However, the post-Covid pricing advantage has nearly eroded, intensifying competitive pressures on profitability. Following the global parent’s divestment of the Robotics business, ABB India is evaluating strategic options for its domestic assets, with a decision expected in the next 2–3 quarters, though a separate listing appears unlikely.

In the near term, ABB faces headwinds from delays in large orders, QCOrelated raw material challenges and heightened competition. Despite these challenges, ABB stands to benefit in the long run given: 1) rising demand for energy-efficient and premium-quality products, 2) a resilient business model, 3) focused growth in high-potential segments such as data centers, rail & metro, renewables, and electronics, and 4) a strong domestic order pipeline. The stock currently trades at a P/E of 56.9x/48.9x on CY26/27E. We roll forward to Sep’27E and maintain our ‘Accumulate’ rating valuing the stock at a PE of 56x Sep’27E (60x CY26E earlier) arriving at a revised TP of Rs5,540 (Rs5600 earlier).

Healthy execution in core segments was offset by softness in Process Automation: Revenue grew by 13.7% YoY to Rs33.1bn (PLe: Rs31.2bn) led by healthy execution of base orders backlog. Robotics revenue increased by 62.7% YoY to ~Rs1.8bn, Motion revenue increased by 8.8% YoY to Rs11.7bn and Electrification revenue also increased by 19.4% YoY to Rs13.8bn while Process automation revenue remained flattish YoY at Rs6.0bn. EBITDA declined by 7.4% YoY to Rs5.0bn (PLe: Rs4.2bn) with EBITDA margin contracted by 344bps YoY to 15.1% (PLe: 13.4%) largely due to lower gross margin reflecting QCO impact. PAT declined by 7.2% YoY to Rs4.1bn (PLe: Rs3.6bn) due to weaker operating performance despite lower effective tax rate of 24.6% (vs 26.3% in Q2FY25).

Healthy Order book stands at Rs99.0bn (0.8x TTM revenue): Order inflows for Q3CY25 decreased by 3.3% YoY to Rs32.3bn due to the impact of large order timing while base order grew by 12.5% YoY. Base/Large order intake mix stood at 95%/5% (vs 81%/19% in Q3CY24). Order book stands healthy at Rs99.0bn (0.8x TTM revenue) with segmental mix of 4%/42%/34%/21% for Robotics/Motion /Electrification/Process Automation.

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