ABB India Ltd ended another year with strong earnings growth but the stock’s sharp decline this year points to another story.
The engineering conglomerate’s Ebitda grew 58% year-on-year in the December quarter aided by improved revenue mix, price advantage, and better economies of scale. Its electrification and process automation segments saw Ebit growth of 65% and 51%, respectively.
However, ABB India’s growth outlook is subdued and its order inflow slowed significantly in the December quarter to ₹2,695 crore, lower than its Rs3,000-3,500 crore range in the seven quarters prior. Its order inflow fell 14% year-on-year in the fourth quarter, sharply dragging ABB India’s 2024 inflow growth to 6% from 23% in 2023.
The company, which is majority owned by Swiss conglomerate ABB Ltd, follows a January-December financial year.
ABB India’s large orders shrank dramatically in the December quarter. Its domestic order inflow fell 19%. However, exports orders, including from group companies, were up 34%, offering some support, and accounted for a 14% share of the company’s total orders in 2024.
Of ABB India’s four segments, order inflow improved only in robotics and discrete automation. However, this segment accounted for less than 4% of the company’s 2024 revenue share and cannot move the needle much.
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In its earnings presentation, ABB India alludes to back-end fiscal spending of the government continuing with rationalized capital expenditure outlays, and private sector capex having limited traction in select sectors.
Jefferies India analysts in a report dated 18 February lowered their revenue growth projections for ABB India as the Indian government’s projected capex in the Budget for 2025-26 fell short of allocations in recent years.
“FY26E narrative is consumer focused. Capex (FY26 BE versus FY25 RE) excluding BSNL and new initiatives, is up 12% year-on-year but lower than 15%+ CAGR since 2021,” the Jefferies analysts said. CAGR is compound annual growth rate.
“We lower our CY24-26E revenue CAGR to 22% from 25% and lower gross margins year-on-year which is leading to a 15%+cut in estimates,” they said.
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ABB India’s gross margin in the December quarter slipped sequentially, implying that its material cost advantage may have peaked out. The management expects a net profit margin of 12-15% on a sustained basis in 2025, down from 15.4% in 2024.
That said, ABB India has a huge cash balance of nearly ₹5,400 crore, which is almost 45% of its balance sheet size. The company’s management said it has a pipeline of opportunities for inorganic expansion.
ABB India’s outgo on account of dividend and capex was below ₹1,000 crore in 2024.
ABB India’s shares are down by about 25% so far in 2025, trading at 44 times the company’s 2026 estimated earnings, as per Bloomberg consensus. A big-ticket order win or an inorganic growth opportunity are triggers to watch out for.
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