Analysts bullish on ABB India's biz outlook; stock zooms 19% in two days

ABB, analysts said, is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centers, railways, metros, and electronics

Shares of ABB India hit a new high of Rs 5,374.45 as they rallied 8 per cent on the BSE in Thursday's intraday trade, amid heavy volumes, in an otherwise weak market on strong business outlook.

In the past two trading days, the stock of the heavy electric equipment company has zoomed 19 per cent after the company's fiscal 2023 ended with a record-high performance, achieving its highest-ever quarterly revenues in the last five years.
 

At 10:24 am, ABB was quoting 6 per cent higher at Rs 5,294.25 as compared to 0.72 per cent decline in the S&P BSE Sensex. The average trading volume on the counter jumped over four-fold today with a combined 2.2 million equity shares changing hands on the NSE and BSE.

ABB said the company continues to have a strong order backlog as of December 31, 2023 (CY23), at Rs 8,404 crore, an increase of 30 per cent year-on-year (Y-o-Y), which provides revenue visibility and is well aligned to support growth plans in the coming periods.

ABB, the management said, is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centers, railways, metros, and electronics.

Although traditional sectors, such as cement, metals, oil & gas, and pharma, are not growing at the desired pace, they still account for the bulk of the order book. The management indicated that as these sectors gather steam, they will act as growth catalysts going ahead. Overall, the domestic market is expanding at a much faster rate than the export market.

Going ahead, ABB India said it is poised for enhanced market penetration, leveraging its diverse portfolio to capitalise on increased economic activities across power transmission, clean energy, railways and metro, public infrastructure, automation, 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, escalation of geopolitical tensions and impact on international trade, global trade imbalances, commodity price fluctuations and possible drying up of global liquidity for industrial countries.

Analysts at Prabhudas Lilladher remain positive on ABB given increasing traction for energy efficient products, changing customer preference towards premium quality products, diversified business model, focus on high growth segments such as Data Centers, Electronics, Rail & Metro, Renewables, etc., and strong domestic order pipeline. The stock, however, is trading above the brokerage firm's target price of Rs 5,329 per share.

Motilal Oswal Financial Services (MOFSL), too, believes that with an expected revival of the private sector, inflows will start ramping up faster, which had been flat in the previous four quarters.

"So far, the company has been benefiting from opex-led orders from the private sector and will now start witnessing capex-led orders from the private sector in few quarters after elections," the brokerage firm said.

MOFSL expects the motion segment to continue to benefit from a strong addressable market for railways and metro-related projects. The preference for quality products from ABB is also helping the company tide over aggressive pricing in some segments of motors. Robotics has seen delays in finalisation, which will start coming in the next few quarters.

"Overall, we expect ABB to benefit from increasing investments across electrification – driven by T&D & renewable power (Rs 2.4 trillion), data center (Rs 40,000-Rs 50,000 crore), and EV charging (Rs 14,000 crore);  motion and mobility – led by planned investments by the government in metro, high-speed rail and RRTS (Rs 5-6 trillion); industrial automation – driven by a surge in investments in smart manufacturing led by PLI (Rs 4 trillion); and robotics," the brokerage firm said with a 'buy' rating on the stock and target price of Rs 5,800 per share.

Meanwhile, global brokergae Jefferies, too, has reportedly maintained a 'buy' call on ABB with a revised target price of Rs 6,115 from Rs 6,085 earlier.

According to Jefferies, ABB's Q4CY23 Ebitda is lower than expectations given a 7 per cent revenue miss. However, order flow is up 35 per cent Y-o-Y and provides strong revenue growth visibility.