NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
ICICI Securities Report
We believe ABB India Ltd. may be one of the major beneficiaries of increasing investments in automation, digitisation, productivity and efficiency. The government’s strong capex push in areas of renewables, water and waste water, manufacturing, infrastructure, warehouse and logistics, electrical vehicles, transport infrastructure, etc., augurs well for ABB’s growth led by its highly diversified product portfolio.
However, long lead orders in its current orderbook of Rs 83 billion have increased to 15% in CY23 as compared to 7% in CY22.
Order inflow outlook over the next couple of quarters too is looking a bit weak given the general election uncertainty. Thus, we believe, revenue growth is likely to witness challenges in CY24E and most of the benefits of lower raw material cost have already been realised.
Therefore, we reduce our CY24E, CY25E revenue estimates by 5.6% and 1.5%, and profit estimates by 11% and 6%, respectively. Given the sharp run up of 45% in the stock price over the last two months, the stock is now trading at 81 times CY25E earnings per share of Rs 82/share (as compared to average valuation of 39 times FY25E for our coverage universe).
Thus, we downgrade ABB to Sell (from Add) with target price of Rs 5,330/share, valuing the stock at 65 times CY25E earnings per share of Rs 82/share.
Key risks:
Strong order inflow over the next two quarters and further reduction in raw material prices.
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