ABB India extends gains as analysts see demand outlook improving

Shares of ABB India extended gains with the scrip gaining another 3 percent on February 14, reacting to the positive commentary from brokerage firms.

The shares traded 1.3 percent higher at Rs 3,115.05 on the BSE at 12:42pm on Tuesday.

The company had reported more than 15 percent on-year rise in revenue for the December quarter at Rs 2,427 crore, while profit after tax surged 58 percent to Rs 306 crore.

The base case of Jefferies is that ABB India should benefit from the domestic infrastructure spend and from a pick-up in exports from the Indian market. The foreign brokerage firm has identified a couple of catalysts like exports picking up and contributing to revenue growth and margins returning to previous levels, which can aid the company’s performance going ahead.

Jefferies has kept a base case target price of Rs 3,620 while in an upside scenario, the stock could hit Rs 4,000 even.

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For 2022, order inflow crossed Rs 100 billion for the first time since divestment of its power grid, turbocharger and solar business in 2018, said HDFC Securities.

ABB India sees the order inflow to sustain at this level going forward and also sees strong demand coming from Tier III and IV cities, with 48 percent of the total new orders from these cities and in the medium term, demand from these cities is expected to match with Tier I and II cities, the domestic brokerage firm added.

Export demand has been stable with growth of 10 percent on-year. However, domestic demand has been higher than export demand and as a result, forms 88 percent of the 2022 revenue, the brokerage firm said.

The brokerage firm, however, believes that punchy valuation would limit further upside on cyclical recovery and, thus, has retained its ‘reduce’ recommendation with an increased target price of Rs 2,819.