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Inflows remain strong, while margin weakness persists

ABB’s results for 2QCY26 reflected outperformance on revenue and PAT, while EBITDA margin performance remained weak. Order inflows remained strong at INR44b (up 50% YoY), taking the order book to INR119b (up 22% YoY). This was driven by a sharp growth seen across the electrification segment, particularly from data centers and other areas. We expect this growth in inflows, coupled with price increases, to support revenue growth going forward. However, margin performance continues to remain weak for the company due to RM and forex volatility. We, thus, cut our margin assumptions going forward while also baking in improved inflows and execution. At the current price of INR7,244, the stock is trading at 91.2x/68.7x/57.1x P/E on CY26/27/28. Our estimates bake in revenue/EBITDA/PAT CAGR of 18%/18%/18% over CY25-28, with EBITDA margin of 13.6%/15.1%/15.9% over the same period. We reiterate our Neutral rating on the stock with a TP of INR6,700, implying 55x P/E Sep’28 estimates.

Beat on revenue, EBITDA, and PAT, while margin below our estimates

Revenue (ex-robotics) grew 21% YoY to INR35.6b, driven by growth across all segments. Absolute EBITDA (ex-robotics) increased 11% YoY to INR4.5b, while EBITDA margins (ex-robotics) contracted 110bp YoY to 12.6%. The positive impact from volume growth on operating leverage and continuous cost optimization was partly offset by an increase in input costs and commodity costs, as well as some time lag in transmitting price revisions in the market. Forex gains of 1.8% also aided margins, and EBITDA ex-forex stood at 10.8%. Adj PAT (exrobotic) increased 7% YoY to INR3.7b vs our estimate of INR3.5b. Order inflows (ex-robotic) increased 50% YoY to INR43.6b, which lifted the overall order book to INR119b (+22% YoY). For 1HCY26 (ex-robotics), revenue increased 13% YoY, EBITDA/PAT declined 11%/12% YoY, whereas margin contracted 340bp YoY to 12.7%

Ordering momentum remains strong during the quarter

ABB saw a sharp pickup in order inflows during 2QCY26, with orders rising 50% YoY and 1HCY26 inflows reaching INR86b (+36% YoY). The growth was largely volume-driven and spread across end markets, with data centers accounting for 15-17% of quarterly orders, metals & mining 15%, oil & gas 9%, buildings & infrastructure 8%, and renewables 6%. Private-sector demand remains healthy, with commercial buildings witnessing relatively quick investment decisions, while data-center customers continue to seek faster deliveries, which has translated into strong ordering from distributors, partners, and system integrators. However, order inflow growth for ABB India stood below ~82% growth for Indian entities, as some orders were booked directly by overseas ABB entities. We increase our inflow estimates to bake in sharp growth in inflows seen in the electrification segment, and expect overall inflows to clock a 16% CAGR over CY26-28.

Margin performance remained weak across segments

EBITDA margin moderated to 12.6% in 2QCY26 from 13.6% in 2QCY25, primarily due to elevated copper and other metal prices, forex volatility, lower exports, and execution of relatively lower-margin projects. ABB has initiated pricing actions, including two price hikes in Electrification, though benefits should flow through with a lag, particularly in competitively bid system orders. We believe margins should improve gradually as pricing catches up and operating leverage improves, although commodity and currency volatility could restrict the pace of recovery over the next few quarters

Valuation and recommendation

At the current price of INR7,286, ABB is trading at 92x/69x/57x P/E on CY26/27/28. We trim our estimates by 5% for CY26 to factor in the net impact of improved order inflows and execution, as well as lower-than-expected margin performance in 1HCY26. Adjusting for robotics sales, we expect revenue/EBITDA/PAT CAGR of 18%/18%/18% over CY25-28, with EBITDA margin of 13.6%/15.1%/15.9% over the same period. We reiterate our Neutral rating on the stock with a TP of INR6,700, implying 55x P/E Sep’28 estimates.

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