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Strong Q4 powers ABB India, but near-term positives seem priced-in

ABB India (ABB) has leveraged demand from quality players to manage deeper penetration across market segments and localisation has helped cut costs, leading to better margins

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Devangshu Datta Mumbai
3 min read Last Updated : Feb 26 2024 | 11:05 PM IST
The profit after tax (PAT) of ABB India beat Street estimates during October-December (Q4) of 2023 (ABB has a year-ending in December 31), as margins beat expectations.

Revenue growth was low due to a higher share of long-duration projects. Order inflows have flattened and future growth depends on how fast orders are finalised.

ABB India (ABB) has leveraged demand from quality players to manage deeper penetration across market segments and localisation has helped cut costs, leading to better margins.

ABB’s potential customers come from transmission, railways, data centres, electronics, and PLI-led capex and the prospects are good since these are growth sectors. The margins could remain strong.

Revenue grew 14 per cent year-on-year (Y-o-Y) to Rs 2,760 crore, with flat revenues in robotics & motion (up 2 per cent Y-o-Y), electrification doing well (up 19 per cent), and also growth in process automation (up 23 per cent).


Gross margin at 37.5 per cent expanded 140 basis points (bps) Y-o-Y (80 bps quarter-on-quarter Q-o-Q). Earnings before interest, taxes, depreciation and amortisation (Ebitda) at Rs 410 crore saw 15 per cent Y-o-Y growth, with a margin of 15.1 per cent, flat Y-o-Y and down 70 bps Q-o-Q.

PAT at Rs 340 crore grew 13 per cent Y-o-Y. The new order inflow stood at Rs 3,140 crore (up 35 per cent), while the order book stood at Rs 8,400 crore (up 30 per cent).

On an annual basis, revenue, Ebitda and PAT were reported at Rs 10,440 crore, Rs 1,490 crore, and Rs 1,240 crore, respectively, up 22 per cent, 55 per cent, and 80 per cent Y-o-Y.

Ebitda margin expanded 310 bps to 14.3 per cent over 2022.

The cash balance stood at Rs 4,810 crore versus Rs 3,150 crore, with free cash flow generation of Rs 1,170 crore (up 104 per cent Y-o-Y).

Improved employee productivity and cost controls led to strong margins of 15.1 per cent despite forex losses of Rs 10 crore in Q4CY23.

While demand is good from renewables, data centres, railways, metros, and electronics/ PLIs, demand from traditional customers in cement, metals, oil & gas, and pharma is slow.

The management guided that the domestic market is growing much faster than exports. The company is hoping for more capex-led orders from the private sector.

ABB will gain from investments across electrification. It will be driven by transmission and distribution (T&D), renewable power, data centres, EV charging, planned investments in metro, high-speed rail and industrial automation in smart manufacturing modes led by PLI and robotics. In robotics, order inflow declined 53 per cent Y-o-Y owing to delays in finalisation, but revenue was up 71 per cent.

Margins contracted 450 bps due to thin margins from consumers and the general industry.

The management says it is seeing a turnaround in low-growth segments, which have substantial shares in the order book. There is a huge expansion in data centre capacity and traction in electronics manufacturing. Although ABB intends to continue looking for exports, it sees faster domestic growth to continue.

Tight crude prices, supply chain-related issues, currency volatility, and continuing inflation are key concerns.

Delays in decision making by key clients and slow spending on government projects can impact domestic order inflows adversely. Intense competition could impact margins. 

Most analysts, however, remain positive on the stock, which is up 17 per cent since Q4 results.

According to Bloomberg, 13 out of 22 analysts polled post Q4 are bullish on the stock, while only four have 'reduce' rating; rest are 'neutral'. Their average one-year target price is Rs 5,358.

Topics :CompassABB IndiaRailways

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