ABB India Share Price Down 35% In A Year — Buying Opportunity For Investors?
A large portion of the correction can be tied to operational uncertainty surrounding ABB India.
Shares of ABB India Ltd. have fallen sharply this year, registering a downtick of more than 24% on a year-to-date basis. Over a 12-month period, the stock has gone through a strong valuation correction, falling more than 35%.
ABB India, in fact, has lagged behind other multinational capital goods companies such as Siemens Ltd. and Cummins India Ltd.
The most evident factor is valuation. ABB India currently trades at 57 times its price to earnings, compared to its five-year average of 74 times. This represents a 23% discount.
In contrast, Siemens commands a premium of 69% to its historical average. The stock is currently trading at times versus 32 times the long-term mean.
The same can be said for Cummins India as well, which trades at a premium of 21%, trading at 46 times against its five-year average of 38 times. This chart clearly shows that ABB India has gone through a downward re-rating, at least compared to its peers.
Why Have ABB Shares Fallen?
A large portion of the correction can be tied to operational uncertainty surrounding ABB India.
Although large projects remain in the pipeline, sluggish decision-making by customers has delayed the conversion of actual orders.
JPMorgan expects the company's large-ticket business to remain soft in the second half of this calendar year, which would then lead to earnings per share (EPS) cuts.
To add to ABB's woes, analysts believe the company has already passed its margin peaks and won't return to those high levels anytime soon.
Revenues, too, have been slightly lower than anticipated, which can be tied to macro factors that haven't shown any signs of tapering off either.
Will Things Improve For ABB India?
There appears to be light at the end of the tunnel for ABB India, with JPMorgan and Ambit Capital expecting faster conversion of orders and stronger project pipeline.
A potential recovery of capital expenditure in the process industries is expected to help things out as well, even supporting medium-term growth.
FY26 could start seeing the conversion of this pipeline into orders and ABB is best placed in our capability mapping for process industries, as per Ambit Capital.
Moreover, analysts tracking the stock say that disruptions caused by Quality Control Orders are temporary in nature and that the pressure on the stock can subside in the near term.
On the flip side, though, growth momentum is likely to remain range-bound for the company.
Stock Outlook
The outlook on ABB India, at least as far as brokerages are concerned, remain modest, but better than peers.
An upside of 7% is seen from current levels, with 50% of the coverage on the stock recommending a 'buy' rating. In contrast, Siemens has an upside of 4% with a slightly more favourable analyst support while Cummins has a flat outlook, as per Bloomberg data.
