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Result Analysis

ABB India’s Q4CY23 print highlighted moderating growth as high base effect comes into play. Revenue growth of 14% YoY moderated driven by weakness in the motion segment pertaining to LV motors while electrification and process automation continue to report above 15% YoY revenue growth. EBITDA margin came in above 15% for second consecutive quarter marked by continued strength in gross margin. Order Inflows growth of 34% YoY was driven by large orders from traction converters railways business.

Our View

ABB ended the year CY23 on a strong note with revenue growth maintaining above 20% trajectory, EBITDA margin continuing to see strong expansion (+310 bps) resulting in supernormal PAT growth of 82%. Order inflow and Orderbook growth of 23% and 29% continue to provide visibility for the near-term growth to sustain. ABB’s strong continued performance has been led by both steady state growth in its core end-user industries such as cement and oil & gas, high capex growth in key segment of Railways & Metro, its increased penetration in electronics and F&B and entry into tier-2,3 cities. The runway for some of these demand drivers seems long with strong investments expected in transportation infrastructure (particularly high-speed trains), building infrastructure (airports, malls, stadiums etc.), power distribution solutions with high growth power demand and increasing load complexity. We expect the company to report revenue CAGR of 21% over CY23-25 while EBITDA margin is expected to remain at similar levels with operating leverage benefit being a lever to compensate the risk of higher commodity prices. We downgrade to ADD from BUY given the sharp run-up in the stock price since our last BUY recommendation. Target Price of Rs5,250 based on 60x CY25 EPS.

Result Highlights

* Revenue growth moderated to 14% YoY with revenue at Rs27.6bn. Electrification and Process Automation saw ~20% YoY revenue growth while Motion saw revenue drop of 2% YoY.

* EBITDA margin at 15.1% (+100bps YoY, -70bps QoQ). Gross margin stood above 40%. Motion (17.7%, +160bps YoY) and Electrification (19%, +370bps YoY) saw expansion in EBIT margin while Process Automation (12.8%, -480bps YoY) and Robotics (11.8%, -450bps YoY) saw decline.

* PAT (continuing) grew by 13% YoY to Rs3.45bn (2% below estimates).

* Order inflows came in at Rs31.9bn, up 34% YoY driven by high growth in motion segment OI.

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