Reduce ABB India Ltd For Target Rs.6,694 By Geojit Financial Services Ltd
ABB India manufactures heavy engineering and industrial equipment, and undertakes engineering, procurement and construction projects. It operates in the robotics and motion, electrification products and industrial automation segments.
* Revenue from operations rose 21.0% YoY to Rs. 3,559cr in Q2CY26, supported by price management, volume growth, and demand from the buildings, data centre, renewable, and metal and mining sectors.
* Electrification products’ revenue rose 30.9% YoY to Rs. 1,804cr, led by higher volume, effective price management and strong demand from data centres.
* Orders increased 50% YoY to Rs. 4,363cr and order backlog rose 22% YoY to Rs. 11,898cr, on strong demand from the electrification and motion segments.
* EBITDA rose 11.4% YoY to Rs. 486cr. But EBITDA margin contracted 110bps YoY to 13.7%, owing to higher cost of sales (+28.1% YoY).
* Adjusted PAT grew 8.0% YoY to Rs. 370cr but PAT margin declined by 125bps to stand at 10.4%.
Outlook & Valuation
ABB India delivered a strong quarter on broad-based aided by deeper penetration into Tier-2 and Tier-3 cities through a dedicated on-ground sales team. Going forward, capacity investments in data-centre-specific products, continued price-list revisions to offset commodity inflation, an expanding channel-partner network, and a focus on megatrends such as electrification, automation, digitalisation and grid modernisation should sustain growth. However, elevated copper and metal prices, a weakening rupee, heightened competitive intensity in L1-based tendering, and geopolitical uncertainty linked to the West Asia conflict are expected to keep nearterm margins under pressure. Hence, We cut our margin estimates and downgrade to REDUCE rating based on 64x CY27E adjusted EPS multiple, given that downgraded earnings and a rich entry point leave little room for further re-rating
Key concall highlights
* In Q2CY26, data centres contributed 15-17% of the total orders, emerging as a key demand driver, as customers sought faster delivery timelines from local manufacturing facilities.
* The company expects data centre demand to grow multifold in CY27 and CY28, and is, therefore, investing in capacity for specific products required by hyperscalers and colocation operators.
* The management maintains a capacity utilisation strategy of 80-85%, ensuring 15-20% headroom annually to cater to future demand while avoiding supply-chain bottlenecks.
* The company sees steady growth in water and wastewater management, with ABB’s 4-8% market share and a projected 10% CAGR, led by motors, drives, PLCs, and strong customer engagement in Tier 2/3 cities through tailored programs.
* The management expects at least 40% of the Rs. 11,900cr order backlog to be consumed within the next two quarters, with the balance extending into CY27.
* ABB’s next 2-3-quarter outlook factors in a government capex pickup post the monsoon, private consumption growth and a robust manufacturing base, though geopolitical risks and fallout of a subnormal monsoon remain monitorables.
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SEBI Registration Number: INH200000345
