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Mixed Q2; strong order inflow reinforces outlook

We revise our EPS estimates by +0.7%/+4.5% for CY27E/28E factoring in strongerthan-expected order inflows, a record order backlog and improved revenue visibility. ABB India (ABB) reported a mixed quarterly performance with revenue growing ~21% YoY to Rs35.6bn, while EBITDA margin contracted 108bps YoY to 12.6% due to rupee depreciation, forex volatility and elevated raw material costs. Order inflow surged ~50% YoY, led by Electrification (+77% YoY) driven by robust demand across data centres, buildings & infrastructure, metals & mining, renewables and process industries, taking the order backlog to a record ~Rs119bn, with ~40% executable over the next two quarters. Motion continued to witness healthy traction across railways, metros and industrial applications, while Process Automation remained supported by marine, refining and conventional power. Data centres continue to emerge as a key growth driver, supported by strong enquiries from hyperscalers and colocation players, capacity expansion and localisation at the newly commissioned Nelamangala facility. Although commodity inflation, higher copper prices and forex volatility remain nearterm headwinds, recent price hikes and easing QCO-related disruptions are expected to support gradual margin recovery. With a net cash position of ~INR7.2bn, healthy tendering activity across power, railways, water, renewables and infrastructure, and continued investments in electrification, automation and AI-led data centres, ABB remains well positioned to deliver sustainable profitable growth over the medium term

ABB is likely to face headwinds from higher input cost and forex volatility amid West Aisa crisis in the near term. However, we remain constructive on ABB in the long run given:

1) rising demand for energy-efficient and premium-quality products

2) its resilient business model

3) focused growth in high-potential segments such as data centers, rail & metro, renewables, and electronics

4) a strong domestic order pipeline. The stock currently trades at P/E of 67.3x/55.5x on CY27E/28E. We maintain our ‘Hold’ rating, valuing the stock at a P/E of 58x Jun’28E (56x Jun’28E earlier), reflecting strong order momentum and improving structural growth opportunities across electrification, automation and data centres, resulting in revised TP of INR6,944 (INR6,523 earlier).

Higher input costs and rupee depreciation impact margins despite strong execution:

Revenue grew by 21.0% YoY to INR35.6bn (PLe: INR32.4bn) led by growth across all segments. Electrification increased by +30.9% YoY to Rs18.0bn driven by effective price management and increased volume contribution while motion increased by +16.6% YoY to Rs12.7bn driven by contribution from all divisions and Automation increased by 6.5% YoY to Rs5.2bn led by the energy industries division. Gross margin contracted by 274bps YoY to 37.1% (PLe: 38.4%) due to elevated input costs. EBITDA increased by 11.4% YoY to Rs4.5bn (PLe: Rs4.2bn) while EBITDA margin contracting by 108bps YoY to 12.6% (PLe: 13.1%) largely due to lower gross margin despite operating leverage. Adj. PAT increased by 8% YoY to Rs3.7bn (PLe: Rs3.6) with effective tax rate remaining flattish YoY to 25.8%.

Strong order book at INR119.0bn (0.9x TTM revenue):

Order inflows for Q2CY26 increased by 49.6% YoY to INR43.6bn led by base orders in Electrification and an increase in export orders in Motion and Automation. Order book stood at INR119.0bn (0.9x TTM revenue) up by 22.2% YoY, with segmental mix of 40.8%/40.6%/18.6% for Motion /Electrification/Process Automation.

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