ABB India Limited

 

ABB India Limited (ABB.NS)

Equity Research Report

Date: April 15, 2025

Executive Summary

ABB India Limited, a subsidiary of ABB Group, is a leading technology company specializing in electrification, robotics, automation, and motion solutions. With a strong presence in the Indian market for over several decades, the company continues to benefit from India's growing infrastructure development, industrial automation trends, and the push toward renewable energy and electrification.

Recommendation: BUY
Target Price: ₹6,850
Current Price: ₹5,950
Upside Potential: 15.1%
Investment Horizon: 12-18 months

Company Overview

ABB India Limited is a major player in the industrial technology sector with operations across multiple segments:

  • Electrification: Power distribution solutions, switchgear, circuit breakers, and related products
  • Motion: Motors, generators, drives, and mechanical power transmission
  • Process Automation: Control systems, measurement, and analytics
  • Robotics & Discrete Automation: Industrial robots, automated manufacturing solutions

The company has manufacturing facilities in Bangalore, Vadodara, Nashik, Faridabad, and Peenya, serving both domestic and export markets.

Investment Thesis

  1. Infrastructure Development Catalyst: ABB India is strategically positioned to benefit from India's significant infrastructure push, including smart cities, power transmission upgrades, and industrial projects.

  2. Energy Transition Beneficiary: The company offers solutions critical for renewable energy integration, grid modernization, and energy efficiency improvements, aligning with India's climate goals.

  3. Industrial Automation Growth: Indian manufacturing's shift toward Industry 4.0 creates robust demand for ABB's automation, robotics, and digitalization offerings.

  4. Strong Parent Support: The global ABB Group provides technological expertise, R&D capabilities, and global best practices to the Indian operations.

  5. Domestic Manufacturing Emphasis: ABB India benefits from government initiatives like "Make in India" and production-linked incentive schemes.

Financial Analysis

Key Financial Metrics (₹ in Crores)

Metric FY 2022 FY 2023 FY 2024 FY 2025E FY 2026E
Revenue 8,469 9,421 10,844 12,252 13,843
EBITDA 953 1,104 1,355 1,592 1,868
EBITDA Margin 11.3% 11.7% 12.5% 13.0% 13.5%
Net Profit 598 743 901 1,102 1,315
EPS (₹) 28.2 35.1 42.5 52.0 62.1
ROE 14.8% 16.2% 17.5% 18.4% 19.2%

Revenue Breakdown by Segment (FY 2024)

  • Electrification: 42%
  • Motion: 26%
  • Process Automation: 20%
  • Robotics & Discrete Automation: 12%

Balance Sheet Strength

  • Debt-to-Equity Ratio: 0.11 (as of December 2024)
  • Cash Reserves: ₹2,485 crores
  • Working Capital Cycle: 63 days (improved from 68 days in FY2023)

Valuation

Valuation Multiples

Multiple Current 5-Year Average Industry Average
P/E 28.2x 33.7x 30.5x
EV/EBITDA 21.5x 24.8x 22.3x
P/B 5.1x 5.7x 4.9x

Discounted Cash Flow Analysis

  • WACC: 11.5%
  • Terminal Growth Rate: 5.5%
  • Implied Fair Value: ₹6,850

Comparative Valuation

ABB India currently trades at a slight discount to its historical multiples and is broadly in line with industry peers. Given its superior growth prospects and margin improvement trajectory, we believe the stock deserves a premium multiple.

Growth Drivers

  1. Electrification Expansion: Growing demand for reliable power distribution systems in industrial and urban development.

  2. Renewable Integration: Solutions for integrating solar, wind, and other renewable energy sources into the grid.

  3. Industrial Automation: Increasing adoption of automation solutions across manufacturing sectors.

  4. Data Center Power: Rising demand for reliable power management in India's growing data center industry.

  5. Railway Electrification: Ongoing projects to electrify Indian Railways creating demand for ABB's electrification products.

Industry Analysis

Market Position

ABB India maintains leadership positions in:

  • Low-voltage switchgear
  • Variable frequency drives
  • Process automation systems
  • Industrial robots

Competitive Landscape

Competitor Market Share Key Strength Relative Position
Siemens India 18% Digitalization Comparable
Schneider Electric 15% Energy Management ABB Stronger in Automation
Honeywell Automation 8% Process Control ABB More Comprehensive
Rockwell Automation 5% Factory Automation ABB Stronger in Electrification

SWOT Analysis

Strengths

  • Diversified product portfolio across multiple industrial segments
  • Strong technological capabilities backed by global parent
  • Established brand reputation and customer relationships
  • Manufacturing presence across India

Weaknesses

  • Exposure to cyclical industrial capital expenditure
  • Import dependency for certain high-tech components
  • Project execution delays in large infrastructure projects

Opportunities

  • Energy transition investments
  • Manufacturing capacity expansion in India
  • Digitalization of industrial processes
  • Export potential to emerging markets

Threats

  • Intensifying competition from domestic and global players
  • Raw material price volatility
  • Macroeconomic slowdown impacting capital investments
  • Technological disruption in automation sector

Recent Developments

  1. March 2025: Announced new manufacturing capacity for EV charging infrastructure in Bangalore facility.

  2. February 2025: Secured ₹850 crore order for electrification components for metro rail projects.

  3. December 2024: Launched new generation of industrial robots tailored for the Indian manufacturing sector.

  4. November 2024: Reported 18% YoY growth in order inflows with substantial gains in electrification segment.

  5. October 2024: Completed acquisition of a specialized automation solutions provider to strengthen its industrial automation offerings.

Risk Factors

  1. Economic Slowdown: Potential delays in industrial capital expenditure during economic downturns.

  2. Supply Chain Disruptions: Semiconductor shortages and global logistics challenges may impact product availability.

  3. Pricing Pressure: Increased competition in standardized products leading to margin pressure.

  4. Technology Transition Risks: Rapid technological changes requiring continuous investment in R&D.

  5. Project Execution: Delays in large-scale infrastructure projects affecting revenue recognition.

Investment Recommendation

We recommend a BUY rating for ABB India Limited with a target price of ₹6,850, representing a 15.1% upside from current levels. The company is well-positioned to capitalize on India's industrial growth trajectory, energy transition initiatives, and infrastructure development plans.

Investment Rationale:

  1. Consistent margin expansion driven by operational efficiency and product mix improvement
  2. Robust order book providing revenue visibility
  3. Strategic alignment with India's infrastructure and industrial growth themes
  4. Strong balance sheet enabling organic and inorganic growth opportunities
  5. Technological leadership in key growth segments

Recommendation: BUY
Target Price: ₹6,850
Time Horizon: 12-18 months

Disclaimer

This research report is prepared for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results. Investors should conduct their own due diligence before making any investment decisions.

Analyst: Jitendra Kumar
Date: April 15, 2025

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