Accumulate This Largecap Stock, Order Inflow Rallies 38% YoY, Strong Revenue Outlook

Reputed brokerage firm Prabhudas Lilladher has given an 'accumulate' rating to the stock of ABB India. Order inflows of the company reported strong growth of 38% YoY at Rs. 26.3bn, driven by growth across channels, divisions, segment and exports. Additionally, its order book stood at Rs. 65.2bn as on 3QCY22.

Stock To Accumulate: Target Price

The Current Market Price (CMP) of ABB India is around Rs. 3028. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 3291. This stock has the potential to give an 8.68% return, in the upcoming 12 months. This mid-cap stock has a market capitalization of Rs. 65,768 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 3028
97Target Price	Rs. 3291
Potential Upside	8.68%
52-week high share price	Rs. 3,446.30
52-week low share price	Rs. 1,944.60

Quarterly earnings

ABB India (ABB) reported strong quarterly performance with revenue growth of 19.2% YoY. EBITDA margins were healthy at 10%. Current capacity utilization stands at 85-90%. Sales came in at Rs. 21.2bn, up 19.2% YoY, led by healthy opening order book and customer demand. Motion segment revenue grew 26% to Rs. 8.8bn, Electrification 27% to Rs. 8.8bn, Process Automation 3% to Rs. 3.5bn. While Robotics segment declined 9.8% YoY to Rs. 577mn, due to supply chain issues. EBITDA grew 24.9% YoY to Rs. 2.1bn.

Order pipeline and demands

xRecently, ABB has inaugurated smart instrumentation factory for production of measurement and analytical devices, to meet increasing domestic demand. Order pipeline continues to remain strong in high growth sectors such as data center, railways & Metro, F&B, renewables etc. While, data center market opportunity stands strong, on back of 5G roll out, RBI's data localization norms, and cloud storage adoption. Management targets PBT margins of ~10% going forward.

Stock Valuation

"We remain positive on ABB in long run given its diversified business model with focus on high growth segments, healthy exports outlook and organic as well as inorganic growth. Given robust enquiry pipeline, penetration in Tier 3 & 4 markets driving volume growth across businesses and focus on operational efficiencies, we have revised our earnings estimates upwards by 4.9%/3.9%/5.6% for CY22/CY23/CY24. The stock is trading at PE of 94.8x/76.1x/61.6x CY22/23/24E. We maintain Accumulate rating on stock with revised target price of Rs. 3,291 (Rs. 3,115 earlier) valuing it at PE of 67x CY25E," giving a buy rating, Prabhudas Lilladher stated.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.