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Better placed

ABB India’s 4QCY24 results were ahead of our estimates on revenue/EBITDA/PAT. The company reported 22%/52%/54% YoY growth in revenue/EBITDA/PAT. This was driven by seamless execution and continued strength in margins across segments. Order inflows were down 14% YoY due to the transient impact of slow government and private capex. We expect ABB to be relatively better placed than peers, as 1) ABB has more than 50% exposure to high- and moderate-growth segments, 2) the company has better control over margins on cost efficiencies even if gross margin come off from current levels in future, and 3) it has the ability to gain more on exports as it is being preferred by group companies for exports. We cut our estimates by 6%/9% for FY25/26 to bake in slightly lower order inflows across segments due to slower government capex (35-40% indirect exposure) and slower than expected private capex growth. ABB is currently trading at 53x/47x on CY25E/CY26E earnings. We remain positive on the company and maintain BUY with a revised TP of INR6,700, which implies 60x Mar’27E earnings.

Better-than-expected results led by better price realization and leverage of higher volumes

ABB reported a good set of numbers, with a beat across all parameters. Revenue at INR33.65b grew 22% YoY, beating our expectation of INR31.4b by 7%. With robust demand, stable commodity prices, price hikes and a better product mix, gross margin expanded ~190bp YoY to 40.5%. This drove EBITDA growth of 58% YoY to INR6.6b vs. our estimate of INR5.8b (14% beat). Accordingly, EBITDA margin expanded 440bp YoY to 19.5% vs. our estimate of 18.3%. PAT grew 54% YoY to INR5.3b vs. our estimate of INR4.7b, aided by a lower tax rate of 24.6% vs. our estimate of 26.3%. Order inflows for 4QCY24 stood at INR27b, down 14% YoY, due to a high base of last year, which had one-time large orders from Motion and Process Automation. Overall order inflows for CY24 were up 6% YoY at INR131b; within this, large orders were up 20% YoY, which shows the changing order book mix of the company. Cash balance stood at INR53.9b at the end of 4QCY24. NWC increase was mainly witnessed in inventory, which is consciously built to cater to the delivery of the backlog as per the agreed schedule. For CY24, ABB reported revenue/orders/EBITDA/ PAT growth of 17%/6%/55%/50% YoY.

Order inflows hit by slow spending from government and private sector

Order inflow growth for CY24 stood at 6% YoY and was below our estimates. This was impacted by transient weakness from government and private capex. ABB expects cycles of moderate or high-growth trends in capex until a broad-based capex revival happens. However, enquiry levels from customers remain strong for the company. During the year, motion and process automation segment inflows declined, while electrification and robotics inflows remained strong. ABB expects to benefit from sub segments like renewable and power T&D, data center, transportation and F&B to remain strong within electrification, subsegments like capex from bioethanol, hydrogen, F&B, transportation, pharma to remain strong within motion segment. For ABB, some headwinds are visible in process industries, such as metals, oil and gas, and cement. In process automation, the company expects strong growth across automotive, EV, electronics and warehousing technologies. We expect a CAGR of 15% in total order inflows over CY24-27E.

Margin performance remains strong

ABB has maintained strong margins across segments, driven by improved volumes, pricing advantage, and cost efficiencies. With some demand moderation being seen and with the benefit of low cost RM inventory fading away, we expect margins to come down from current levels of 18.9% in CY24.. We bake in EBITDA margin of 18.3%/17.7%/17.1% for CY25/26/27E. ABB expects PAT margin to be broadly around 12-15% going forward.

Electrification segment growth momentum continues

Electrification segment witnessed 33% YoY revenue growth in 4QCY24, aided by seamless execution of data center orders from EPC customers and export markets from Distribution Solution division. However, order inflow for the segment was largely flat YoY but was down sharply qoq due to large order wins on data centers received in 3QCY24. Key areas driving growth include distribution solutions, smart power, and smart buildings. Demand remains strong across key industries such as renewables, data centers, transportation, and food & beverage. We expect the segment’s revenue/orders to clock a CAGR of 21%/19% over CY24-27, with EBIT margins to be in the range of 20%-22%.

Motion segment ordering was weak, while Robotics segment saw strong execution

Robotics segment was able to convert opportunities from electronics and automotive segments, increasing order inflows by 161% YoY. Motion segment revenue growth was driven by traction drives and converters. Ordering in Motion segment was down 30% YoY on high base of last year which had order wins worth INR6b from mobility. However, we expect both these segments put together to clock a revenue CAGR of 12% over CY24-27 on stronger execution, with EBIT margin ranging around 20%-21%.

Process automation segment witnessed both inflow and revenue decline

Process automation segment inflows were down 18% YoY in 4QCY24. The segment benefited from orders for rectifiers from metals majors, as well as high-value orders from the energy industry. The segment faced some headwinds in the past few quarters, but management believes it to be a transient period and inflows for the segment are expected to grow on increased demand from cement, metals, O&G and other segments. We expect this segment growth to remain impacted by slower ordering and hence expect a revenue CAGR of 4% over CY24-27.

Valuation and recommendation

ABB India is currently trading at 53.0x/47.4x P/E on CY25/CY26 estimates. We trim our estimates by 6%/9% for CY25/CY26 to factor in slightly lower ordering and margin assumptions across segments. We thus expect revenue growth of 13%/16%/16% in CY25/CY26/CY27 and margins of 18.3%/17.7%/17.1%, translating into PAT growth of 10%/12%/11% for CY25/CY26/CY27. Accordingly, we estimate a PAT CAGR of 11% over CY24-27. We maintain our BUY r

Key risks and concerns

Slowdown in order inflows, pricing pressure across segments, increased competition, supply chain issues, and geopolitical risks could affect our estimates and valuations.

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