ABB extends rally in a weak market on strong Q1; stock up 17% in 3 days

Analysts believe that increased traction in exports and services coupled with strong execution drove ABB's strong performance across segments.

Shares of ABB India were up 5 per cent to Rs 2,358 on the BSE in Monday’s intra-day trade in an otherwise a weak market. The stock has surged 17 per cent in the past three trading days after the company reported a solid performance in the March quarter (Q1CY22).

In the past one week, the stock has outperformed market by 13 per cent, as compared to 5 per cent decline in the S&P BSE Sensex. In one month, it was up 4 per cent against 9 per cent fall in the benchmark index. Earlier, the stock had hit a 52-week high of Rs 2,469.60 on January 25, 2022.

In Q1, ABB’s standalone net profit more-than-doubled to Rs 370 crore on the back of strong operational performance, while earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded 170 basis points (bps). The company, engaged in heavy electrical equipment business, had posted profit of Rs 151 crore in Q1CY21.

The company's revenue grew 20.8 per cent year on year (YoY) at Rs 1,968 crore from Rs 1,629 crore in the year-ago quarter, whereas, operational EBITDA margin improved 170 bps to 8.5 per cent from 6.8 per cent.

Meanwhile, total orders surged to Rs 2,291 crore, the highest seen for the first quarter in the last five years. "We continue to have a strong order backlog as of March 31, 2022, at Rs 5,229 crore, which provides revenue visibility and is well aligned to support growth plans in the coming quarters," the company said.

Analysts at HDFC Securities believe that increased traction in exports and services coupled with strong execution drove ABB’s performance across segments. A price hike of 18-20 per cent helped offset margin pressure amid commodity inflation.

"The company is witnessing strong export traction in the electrification and motion verticals as a lot of localisation has taken place. Process automation is more cyclical, with growth contingent on capex recovery. Robotics is expected to see greater growth, as local penetration is six robots per 10,000 workers versus the global standard of 120 robots," the brokerage firm said.