ABB India hits new high on strong outlook; surges 46% from Feb low

Shares of ABB India hit a new high of Rs 6,341, as they rallied 7 per cent on the BSE in Wednesday’s intra-day trade on strong business outlook. The stock of the heavy electrical equipment company is quoting higher for the seventh straight trading day, surging 17 per cent during this period. It bounced back 46 per cent from its February 2024 low of Rs 4,342.

ABB is a major electrification and automation player. The company has a strong order backlog as of December 31, 2023, at Rs 8,404 crore, an increase of 30 percent year-on-year (YoY), which provides revenue visibility and is well aligned to support growth plans in the coming periods.

For the calendar year 2023 (CY23), ABB India had reported a record high orders of Rs 12,319 crore and revenue of Rs 10,447 crore. Profit after tax jumped 22 per cent YoY to Rs 1,248 crore. The company’s broad-based growth has come on the back of deepening engagement into diverse market segments, portfolio expansion and localisation for the Indian market.

On outlook, ABB India on February 20, said the company is poised for enhanced market penetration, leveraging its diverse portfolio to capitalise on increased economic activities across power transmission, clean energy, railways, metro, public infrastructure, and automation, while ably supported by government investments.

The company is pioneering advancements in sectors like data centers, electronics, and logistics, aiming for sustained growth despite external headwinds and challenges such as exchange rate volatility, climate change and food inflation.

Further escalation of geopolitical tensions and its impact on international trade, global trade imbalances, commodity price fluctuations and possible drying up of global liquidity for industrial countriesa are also among the headwinds. 

Meanwhile, the brokerage firm UBS recommends a ‘buy’ rating on ABB India with upward revision in target price to Rs 7,550 from Rs 5,380.

Despite near-term concerns over short-cycle order fatigue (especially in the motion division), the brokerage firm thinks that there is plenty of scope for ABB to scale up its new order growth across motion (mobility-led positioning) and low/medium-voltage electrification product expansion, which augurs well for margins even from current levels.

ABB's low/medium-voltage product suite is expanding in both range and geographical exposure, covering both conventional and emerging market segments. There is a clear focus among global firms, like Siemens and Schneider, along with ABB, on capturing the long-term growth in electrification.

On the motion side, mobility, including semi high- speed rail, conventional rail, and metro, has led the step-up in order inflow run rate, which analysts at UBS think is sustainable on an annual basis (quarterly volatility might persist), given that ABB is focusing on expanding capacity commensurately to tap the growth opportunities.