ABB India rallies 8%, hits new high on strong March quarter results

ABB has positioned itself rightly in the domestic markets to benefit from private capex, industrial automation, PLI-led capex, global offshoring, improved energy demand, and technological advancements

Shares of ABB India hit a new high of Rs 7,792 as they rallied 8 per cent on the BSE in Monday's intraday trade, in an otherwise weak market, after it reported a strong March quarter (Q1CY24) earnings with profit after tax (PAT) jumping 87.8 per cent year-on-year (Y-o-Y) at Rs 460 crore.

Revenue grew 27.7 per cent Y-o-Y at Rs 3,080 crore driven by Electrification (up 30 per cent Y-o-Y), Process Automation (up 73 per cent Y-o-Y), and Robotics & Motion (up 8 per cent Y-o-Y).

Operational earnings before interest, taxes, and amortisation (Ebita) margins expanded 530 bps to 16.7 per cent from 11.4 per cent.

"The expansion of margins was a result of the operational leverage on higher volumes, seamless execution of continuous improvement initiatives, positive price impact enough to offset inflation and cost increase, higher share of service and export revenues and stable currency and commodity price level," ABB said.

 

Total orders surged to Rs 3,607 crore, the highest for the first quarter in the last five years. Total order backlog stood at Rs 8,932 crore.

At 09:32 AM, ABB was trading 8 per cent higher at Rs 7,770 as compared to 0.69 per cent decline in the S&P BSE Sensex. In the past three months, the stock has zoomed 78 per cent.

Going ahead, ABB said higher capex in infrastructure, railways, renewables, power distribution, water, energy, commercial buildings, and metals are likely to provide necessary opportunities for growth. Policy driven public sector capex, with investments in energy transition, FDI in steel, cement, and incentivizing local production (PLI) in areas like specialty steel, and battery manufacturing will also augment the opportunity landscape, the company said.

ABB has positioned itself rightly in domestic markets to benefit from private capex, industrial automation, PLI-led capex, global offshoring, improved energy demand, and technological advancements across user industries, according to analysts.

With ABB being a preferred choice as a quality player with full control over the value chain, it is benefiting from improved product mix, higher services share, better operating leverage (despite nearly 8 per cent of sales going to the parent as royalty), IT fee, and group management fee. Motilal Oswal Financial Services thus expects the net impact of the pass-on of lower raw material prices and improved product pricing to be favorable for margins.

"The company has one of the best RoIC in the capital goods sector and will continue to benefit from an improved addressable market and will improve its share of high-growth segments," the brokerage firm said. It expects a large part of these gains to sustain in the coming years amid a strong demand scenario.