Gains in ABB depend on maintaining pace of order inflow and margins

Strong Q4CY25 order inflow boosts outlook, but margin recovery and sustained execution pace remain key for ABB's re-rating

ABB India saw strong order inflows in the December quarter of calendar year 2025 (Q4CY25). Sales grew 6 per cent year-on-year (Y-o-Y) and 7 per cent quarter-on-quarter (Q-o-Q) to ₹3,560 crore. However, analysts were mixed on ABB India's results for Q4CY25, with some recommending a ‘Reduce’ rating.

 

Orders for Q4CY25 rose 52 per cent Y-o-Y to ₹4,100 crore. Quarter-on-quarter they were up 27 per cent. Large orders came from data centres, automotive, building and infrastructure, railways, and metals segments. The outstanding order book at Q4CY25-end grew 12 per cent Y-o-Y, and 6 per cent Q-o-Q to ₹10,470 crore, which is about 0.8 times trailing twelve month sales. 

The operating profit at ₹550 crore, was down 17 per cent Y-o-Y, but up 9 per cent Q-o-Q. Adjusted operating profit, excluding impact from new labour Codes, was at ₹610 crore, down 7 per cent Y-o-Y, but 22 per cent higher Q-o-Q, and ahead of consensus. Adjusted operating profit  margin contracted 230 basis points Y-oY to 17.2 per cent, but expanded 210 basis Q-o-Q. The company reported a net profit of ₹430 crore, down 18 per cent Y-o-Y, but 6 per cent higher Q-o-Q, a little below consensus. 

Gross margin (including subcontracting cost) was at 38.5 per cent. It contracted 260 basis points  Y-o-Y, but expanded 75 basis points Q-o-Q. Cash balance was at ₹5,800 crore, up from ₹5,500 crore in Q4CY24. The net working capital stood at ₹630 crore, over double of ₹310 crore in Q4CY24, as the company deliberately increased inventory levels to cater to the backlog.

 

Segment-wise, robotics & discrete automation reported sales of ₹130 crore, down 4 per cent Y-o-Y, and 26 per cent Q-o-Q. The motion sales stood at ₹1,200 crore, up 7 per cent  Y-o-Y, and 2 per cent Q-o-Q. The electrification division's sales rose 6 per cent Y-o-Y to ₹1,600 crore, and grew 16 per cent Q-o-Q. Process automation sales stood at ₹650 crore, up 4 per cent Y-o-Y, and 8 per cent Q-o-Q.

 

While the adjusted segment margin expanded for robotics & discrete automation to 13.9 per cent — up 345 basis points Y-o-Y and 585 basis points Q-o-Q — motion segment margin dropped 440 basis points Y-o-Y to 16.5 per cent, (up 105 basis points Q-o-Q). Electrification margin of 21.4 per cent, was down 225 basis points Y-o-Y and up 170 basis points Q-o-Q. Process automation margin of 14.7 per cent was down 470 basis points Y-o-Y and 280 basis points Q-o-Q.

 

Key order wins included orders for low-voltage switchgear from a major data centre, robotics solutions for a new auto company, propulsion systems for Indian Railways, powertrain solutions for a metal company among others.

 

The trend of Q-o-Q improvement suggests activity is picking up after a slump and the company is poised to benefit from any increase in private sector investment. Management is optimistic about opportunities across infrastructure, rail, grid modernisation, and renewables, metals, mining, energy, chemicals, data centres, and electronics. In the last year, the stock has taken a hit due to margin compression and slower order inflows. Order inflow is better and margin recovery may follow going by sequential improvement.

 

Apart from its capacity to service the high-growth data center segment end-to-end, the order mix indicates interest from core industries like metals, chemicals, and oil and gas, which contributed 52 per cent of the order book. Robotics is being driven by the auto sector. There's optimism about opportunities from the India-EU trade agreement, which could bring in both revenues and margin benefits.

 

The raw material cost has increased due to Quality Control Order (QCO) compliance and a large share of imported materials as well as forex and commodity volatility. The impact of QCO may remain for a few more quarters (at least two more) and margins will only start improving on better volumes, price hikes to pass on RM cost pressure, and more localisation.

 

ABB is looking to divest the robotics division, in line with the parent entity’s strategy, and is waiting on shareholder approvals. Management expects net profit margin to stay in the 12-15 per cent range, with an upside if volumes improve, while risks persist from metal prices and forex volatility.

 

Some investors would be cautious about the fact that robotics is due to be divested. Also hedging gains of ₹62 crore contributed significantly to operating profit margin in Q4CY25, which may not be sustainable. Despite downgrades in the last 12 months, ABB continues to be a very high valuation stock.