ABB India Shares Gain After Kotak Securities Upgrades It To 'Buy'

Shares of ABB India Ltd. gained after Kotak Institutional Equities upgraded it to 'buy' from 'reduce', as the company focuses on the European market.

The brokerage has, however, not changed the fair value on the stock of Rs 3,100, implying an upside of 12.5% to the current market price of Rs 2,754.

According to the brokerage the case for ABB exporting motors to the large Europe market is strong given:

• Profitability mandate here for ABB Global

• Shift towards common product platforms by ABB Global

• ABB’s 100% localised offering

• Higher utilisation of India component supplier base versus Europe, help counter headwinds in the domestic motors and process automation business.

India seems to be well-equipped to serve the European demand for IEC LV Motors, given that ABB India's offering is 100% localised, the brokerage said. It has managed to obtain 60% growth in revenue, 25% growth in operating Ebitda and 24% growth in productivity over the past four years, it said.

"ABB sees strong growth tailwinds (rail, data centers, energy efficiency) and endeavors to sustain growth at 1.5 times the market growth," the brokerage said

The company has shared the need for sourcing from cost-effective geographies to strengthen value proposition to customers. It is also working towards simplifying its product platforms to two—standard and premium.

"All this sets base for emerging economies to play a bigger role for the captive demands of the global parent," it said.

Shares of the company rose 2.10% to Rs 2,762 apiece as of 11:45 a.m., compared with a decline of 0.16% in the benchmark Nifty 50.

Of the 35 analysts tracking the company, 17 maintain a 'buy', 12 suggest a 'hold' and 6 recommend 'sell', according to Bloomberg data. The 12-month consensus price target implies a return potential of 13.2%.