PL Stock Report: ABB India (ABB IN) - Q3CY23 Result Update – Robust Q3; strong outlook intact - Accumulate

ABB India (ABB IN) - Amit Anwani - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: ACCUMULATE | CMP: Rs4,311 | TP: Rs4,950

Q3CY23 Result Update – Robust Q3; strong outlook intact

Quick Pointers:

• Order inflows grew 14% YoY to Rs30bn driven by increasing traction from large orders.
• EBITDA margin improvement was due to operating efficiencies & leverage and implementation of effective pricing strategies.

We revise our estimates by 9.8%/8%/2.7% for CY23/24/25, factoring in continued strong performance, improving EBITDA margins and healthy demand outlook. ABB India (ABB) reported a robust quarterly performance, with revenue growth of 30.6% YoY and EBITDA margin expansion of 588bps YoY to 15.8%. Large orders are witnessing traction from last couple of quarters from segment such as Motion and Process Automation, driving order inflow activities, backed with continued momentum from base orders. Exports market is witnessing slowdown, however ABB India’s cost advantage and competitive pricing will drive continued momentum in international geographies. Demand from core sectors (Cement, Metal, mining etc), high growth sector (food & beverages, pharma, automotive, water etc.) and new initiatives (data centers, railways, renewables etc) to propel stronger growth in medium term.

We remain positive on ABB given 1) increasing traction for energy efficient products, 2) changing customer preference towards value added products, 3) ABB’s diversified business model, 4) focus on high growth segments (Electronics, Data center etc), 5) strong order pipeline and 6) organic/inorganic growth. The stock is trading at PE of 78.8x/65x/56.9x CY23/24/25E. We maintain ‘Accumulate’ rating on stock with TP of Rs4,950 (Rs5013 earlier) valuing it at PE of 65x CY25 (68x CY25 earlier).

Revenue growth across segment: Sales grew 30.6% YoY to Rs27.7bn (PLe ~Rs25.9bn), driven by growth across segment. Motion segment revenue grew 11.2% YoY to Rs9.8bn; Electrification grew 18.3% YoY to Rs10.4bn; Process Automation grew 93.1% YoY to Rs6.8bn; and Robotics grew 105.2% YoY to Rs1.2bn. EBITDA grew 107.9% YoY to Rs4.4bn (PLe ~Rs3.2bn), with EBITDA margins expanding by 588bps YoY to 15.8% (PLe 12.3%), driven by lower other expenses as % of sales (14.5% vs 17.5%) and lower employee cost as % of sales (6.4% vs 7.4% YoY). Operational EBITA margin expanded 95bps YoY to 13%. Adj. PAT grew ~114.5% YoY to Rs3.6bn (PLe ~Rs2.7bn), partially aided by higher other income (up 63.9% YoY to Rs768mn).

Strong order inflows of Rs30bn: Order inflows grew 14% YoY to Rs30bn. Order inflows growth was witnessed across segment except Process Automation, which declined 25% YoY, owing to delay closure of few large projects. Order book stands at Rs80bn as on Q3CY23 (0.8x TTM revenue).