1190% Dividends Payout Ahead: Rs 5,300 Electrical Stock Recommended As BUY, Over 14% Rise Seen

ABB India, a heavy electrical equipment company, has been in focus this week after its better-than-expected quarterly earnings and interim dividend recommendations. Brokerages believe that ABB is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centres, railways, metros, and electronics. Hence, they have recommended buying. The highest target price in ABB is Rs 6,058, indicating at least 14.4% potential upside ahead.

On February 26, 2024, ABB's share price stood at Rs 5297.15 apiece, down by 1.72% with a market cap of Rs 1,12,251.04 crore.

There is a buy-on-dips opportunity in ABB shares. Currently, investors cashed in their gains as ABB's share price has zoomed over 18% in the past five trading sessions. While year-to-date, ABB shares have gained by 13.19% on BSE. In a year, the stock is up by 70.42%.

ABB India Dividend:

The company has recommended a final dividend of Rs 23.80 per share i.e., (1190%) on 21,19,08,375 Equity Shares of the face value of Rs.2/- each fully paid up for the financial year ended December 31, 2023, subject to shareholders' approval at the ensuing Annual General Meeting.

The dividend, if declared at the 74th Annual General Meeting, will be paid/dispatched after May 11, 2024, to those Shareholders or their mandates whose names appear as Members in the Company/s Register of Members as holders of Equity Shares as at the end of the business hours on May 4, 2024.

ABB India Target Price:

Motilal Oswal Sets Rs 5,800 TP On ABB:

ABB is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centres, 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 of ~INR84b. 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.

We believe 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 a few quarters after
elections.

ABB is fairly comfortable about its gross margin, which stood at 36.8% in CY23, and it has achieved these gains through an improved product mix, increased localization, and deeper penetration in markets, which we believe will sustain. The company intends to maintain its gross margin at this level through value-added products and deeper penetration in markets despite a higher share of large projects and waning down of RM tailwinds.

We raise our CY24/CY25 EPS estimates by 2%/4.4% to bake in better margins and higher other income. We expect a CAGR of 18% in ABB's order inflow over CY23-25 and expect a CAGR of 23%/22%/20% in revenue/EBITDA/PAT, driven by EBITDA margin of 13.7%/13.9% in CY24/CY25.

We increase our DCF-based TP to INR5,800 from INR5,480, implying a P/E of 65x on Mar'26E EPS. ABB remains our top pick in the sector.

Antique Stock Broking Sets TP Of Rs 6,058 On ABB:

ABB's 4QCY23 operational performance was in line with our expectations. For the quarter, revenue growth stood at a healthy 14% YoY supported by the seamless execution of orders in hand in electrification and process automation segments. EBITDA margin came in at 15.1% and was above our estimates of 14.6%, primarily due to a favorable revenue mix & better realizations leading to operating profit growth of 15% YoY.

Ordering momentum continued to remain strong with a 35% YoY growth in order inflow taking the order book to a multi-year high of INR 84 bn (+35% YoY). The broader commentary on business outlook continues to remain healthy with business momentum witnessing traction across key verticals like data centres, electronics, and railways and metros.

ABB would be a key beneficiary of the Industry 4.0 capex theme as well as the broader capex activity pick-up witnessed across the sector, given its leadership position. We continue to like ABB and maintain a BUY rating on the stock with a target price of INR 6,058 (60x its March 2026 EPS of INR 101).

In 2023, ABB reported record-high orders of Rs 12,319 crore and revenue of Rs 10,447 crore. Strong price execution and increased volumes bolster margins - PBT before exceptional up by 62% and PAT by 22% Y-o-Y. Return on capital employed (ROCE) doubles from 2019 levels to reach 21%, Also, customer outreach to 7000+ customers across 31 tier 2 and 3 markets with ABB Technology Day.

ABB is a technology leader in electrification and automation, enabling a more sustainable and resource-efficient future. The company's solutions connect engineering know-how and software to
optimize how things are manufactured, moved, powered and operated. Building on over 140 years of excellence, ABB's more than 105,000 employees are committed to driving innovations that accelerate industrial transformation.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.