Reduce ABB India Ltd For Target Rs.5,800 By Elara Capital
Ends CY25 on a promising note
ABB India (ABB IN) reported 6% YoY revenue growth to INR 35.6bn in Q4CY25, driven by healthy execution, balanced short- and long-cycle orders, and higher exports, with all segments posting steady growth. However, margin remains under pressure as adjusted EBITDA fell 7% YoY with a 230bp contraction to 17.2%, dragged by an adverse mix, higher commodity cost, forex volatility, and increased imports content due to quality control (QCO) norms. Thus, we retain Reduce with a higher TP of INR 5,800 on 55x CY27E P/E, after factoring in slower-than-expected growth momentum in government and private capex
Healthy execution drives overall performance: Revenue grew 6% YoY to INR 35.6bn for Q4CY25, driven by a healthy mix of short- & long-cycle opportunities and efficient execution along with the rise in exports revenue. Electrification (45% of Q4CY25 revenue) rose 6% to INR 16bn, robotics & motion (37%) was up 6% YoY to INR 13.4bn, while process automation (18%) grew 4% YoY to INR 6.5bn. CY25 top line rose 8% YoY to INR 132bn. Adjusted EBITDA declined 7% to INR 6.1bn while margin contracted 230bp YoY to 17.2%. CY25 adjusted EBITDA margin contracted 290bps YoY to 16%. Adjusted net profit fell 6% YoY to INR 5bn in Q4CY25. CY25 adjusted PAT fell 8% YoY to INR 17.2bn
Better-than-estimates operational performance: Adjusted EBITDA declined 7% to INR 6.1bn on account of a gross margin decline of 230bp YoY. EBITDA margin contracted 230bp YoY to 17.2%, dragged by higher commodity prices and imports content to comply with QCO, which is expected to prevail for the next few quarters. EBIT margin in the electrification segment declined 230bps YoY to 21.4%, hit by continued compliance with QCO guidelines, materials cost impact, forex volatility, while robotics and motion EBIT margin declined 350bp YoY to 16.2%, dragged by forex loss and competitive pricing. Process automation margin declined 470bp YoY to 14.7%, dragged by an adverse revenue mix. ABB seeks to retain 12-15% PAT margin.
Base order momentum continues; order backlog at INR 104.7bn, up 6% QoQ: Order inflows rose 52% YoY to INR 40.9bn, while base orders grew 27% YoY across business divisions. Order backlog comprises ~25-30%, consisting of large orders and the rest made up of base orders. Data centers order comprises ~10-11% of the overall orderbook. Electrification order inflows rose 43% YoY, supported by a large data center order. Process automation orders rose 34% YoY while robotics & discrete automation order inflows rose 283% YoY. Order backlog stood at INR 104.7bn, up 6% QoQ.
Reiterate Reduce with a higher TP of INR 5,800: We introduce CY28E financials into our model, excluding robotics financials from CY26 and recalibrate our EPS estimates by 3% for CY27E, led by healthy all-round performance, supported by execution of better margin orders and robust order inflows in CY25. We retain Reduce with a higher TP of INR 5,800 from INR 5,030 based on 55x (from 50x) CY27E P/E. We expect an earnings CAGR of 16% during CY25- 28E with an average ROE and ROCE of 22% each during CY26-28E.
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