Company Update : ABB India Ltd By Motilal Oswal Financial Services Ltd
Results lower than expectations
*ABB’s results came lower than estimates on margin and PAT due to forex fluctuations and one-off exceptional expense during the quarter. Order inflows declined 12% YoY due to cyclical correction in ordering activity across multiple segments. We would look out for order inflow and margin improvement commentary from the call for both electrification and robotics & motion segment.
* For 2QCY25, revenue grew by 12%YoY while EBITDA/PAT fell by 24%/20%. Revenue was in-line, whereas EBITDA/PAT miss our estimates by 30%/27%.
* Revenue grew 12% YoY to INR31.8b. Electrification revenue growth was strong while other segments were weak due to delays in clearance and decisions in certain sectors.
* Gross margin during the quarter declined 350 bps QoQ and 470 bp YoY. EBITDA margin contracted 620bp YoY to 13.0% versus our estimate of 18.4%. Margins remained under pressure mainly due to contraction in Electrification and Robotics & Motion segments’ margins which were affected by competitive pricing and forex loss during the quarter.
* PBIT margin declined in Electrification segment (at 16.1% in 2QCY25 versus 23.1% in 2QCY24), Robotics & Motion segment (14.7% in 2QCY25 versus 22.5% in 2QCY24). Process automation PBIT margin increased sequentially to 17.1% in 2QCY25 from 16.4% in 1QCY25 and increased YoY versus 16.2% in 2QCY24.
* PAT for the quarter declined 21% YoY to INR3.5b
* Order inflows were weak during the quarter (-12% YoY) at INR30.4b. Base orders formed INR30.2 b (+5% YoY), while large orders at INR130m were impacted by subdued market conditions. This resulted in order book moving up to INR100.6b. ABB has mentioned that after strong growth periods, the company experienced a cyclic correction in ordering activity that is seen across multiple sectors, but it expects a gradual uptick in demand driven by easing inflation and deeper market reach.
* During the quarter, ABB India and Steel Authority of India Limited (SAIL) signed a MoU to digitally transform operations at the Rourkela Steel Plant in Odisha.
* For 1HCY25, revenue increased 7% YoY. EBITDA/PAT declined 10%/8% YoY, while EBITDA margin in 1HCY25 contracted 300 bp YoY to 15.7%.
* The company’s cash position continues to remain robust at INR51.5b at the end of 1HCY25.
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