ABB India Q4 Review - Revenue Growth Moderates But Broad-Based Strong Performance Continues: Yes Securities

Yes Securities Report

Result analysis

ABB India Ltd.’s Q4 CY23 print highlighted moderating growth as high base effect comes into play. Revenue growth of 14% YoY moderated driven by weakness in the motion segment pertaining to LV motors while electrification and process automation continue to report above 15% YoY revenue growth.

Ebitda margin came in above 15% for second consecutive quarter marked by continued strength in gross margin. Order Inflows growth of 34% YoY was driven by large orders from traction converters railways business.

Our view

ABB ended the year CY23 on a strong note with revenue growth maintaining above 20% trajectory, Ebitda margin continuing to see strong expansion (+310 basis points) resulting in supernormal profit after tax growth of 82%.

Order inflow and orderbook growth of 23% and 29% continue to provide visibility for the near-term growth to sustain. ABB’s strong continued performance has been led by both steady state growth in its core end-user industries such as cement and oil and gas, high capex growth in key segment of railways and metro, its increased penetration in electronics and food and beverage and entry into tier-II, III cities.

The runway for some of these demand drivers seems long with strong investments expected in transportation infrastructure (particularly high-speed trains), building infrastructure (airports, malls, stadiums etc.), power distribution solutions with high growth power demand and increasing load complexity.

We expect ABB India to report revenue compound annual growth rate of 21% over CY23-25 while Ebitda margin is expected to remain at similar levels with operating leverage benefit being a lever to compensate the risk of higher commodity prices.

We downgrade to 'Add' from 'Buy' given the sharp run-up in the stock price since our last 'Buy' recommendation. Target price of Rs 5,250 based on 60 times CY25 earnings per share.

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