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Mixed quarter; execution remains in focus

Quick Pointers:

* Base order inflow increased ~10.0% YoY to Rs35.5bn, while large orders decreased by 44.8% to Rs2.1bn in Q1CY25

* Domestic/export revenue mix stood at 93%/7% vs (92%/8% in Q1CY24)

We revised our EPS estimates for CY25/CY26 by -1.5%/-1.5% factoring in executing delays in Process Automation. ABB India (ABB) reported quarterly performance with modest revenue growth of 2.6% YoY with flattish EBITDA margin of 18.4%. During the quarter, the growth was led by strong momentum across all segments except in Process automation which was impacted by a change in delivery schedule. Order book pipeline remains robust seeing strong traction from fast growing diverse business segments, such as Data Center, Electronics and Renewables along with traction equipment like propulsion systems and traction motors for rail & metro. Management’s efforts for expanding in Tier-2 and Tier-3 cities are yielding results while the base order intake is projected to sustain at ~Rs35bn per quarter. Going forward, management continues to guide for the PAT margin of 12-15% (15.4% in CY24) with a strategic focus on consumption, investments, premiumization and global uncertainties..

We remain positive on ABB given 1) increasing traction for energy efficient and premium quality products, 2) resilient business model, 3) focus on high-growth areas such as data centers, rail & metro, renewables and electronics, and 4) strong domestic order pipeline. The stock is trading at a P/E of 58.8x/51.4x CY25/26E. We maintain ‘Buy’ rating with a revised TP of Rs6,851 (Rs6,955 earlier) valuing the stock at a PE of 63x CY26E (same as earlier).

Execution Strength in Core Segments Offsets Process Automation Weakness: Revenue grew modestly at 2.6% YoY to Rs31.6bn (PLe: Rs34.4bn) led by healthy execution in Robotics, Electrification and Motion while Process Automation was down due to lower systems and process industries revenue. Robotics revenue increased by 37.0% YoY to Rs1.5bn while Motion revenue increased by 8.2% YoY to Rs11.0bn. Electrification revenue also increased by 4.7% YoY to Rs13.6bn meanwhile, Process automation revenue declined 19.3% YoY to Rs5.9bn. Gross margin increased by 146bps YoY to 41.7% (PLe: 39.7%). EBITDA rose 3.0% YoY to Rs5.8bn (PLe: Rs5.9bn) with EBITDA margin remaining flat at 18.4% (PLe: 17.2%) driven by better gross margin performance partially offset by higher operating costs. PAT rose 3.2% YoY to Rs4.7bn (PLe: Rs4.9bn) driven by better operating profitability.

Healthy Order book stands at Rs99.6bn (0.8x TTM revenue): Order inflows for Q1CY25 increased by 4.0% YoY to Rs37.5bn, driven by base order intake growth of 9.6% YoY to Rs35.5bn. Base/Large order intake mix stood at 95%/5% (vs 90%/10% in Q1CY24). Order book stands healthy at Rs99.6bn (0.8x TTM revenue) with segmental mix of 5%/39%/34%/22% for Robotics/Motion/Electrification/Process Automation.

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