ABB India hits all-time high after UBS ups target price; here is why the brokerage is bullish on the counter

ABB India share price today, ABB India share price target: ABB India shares zoomed on Thursday, March 27, on D-Street after the tech company got a lift in its target price from UBS. The global brokerage has maintained a buy call on the counter and raised the target price to Rs 7,550 from Rs 5,380 earlier.

The brokerage believes ABB will continue to expand its product suite and capacity, especially in the highly scalable electrification segment, and gain market share in the mobility segment. The revised target implies an upside potential of 27.2 per cent from the previous close. 

ABB India shares rose as much as nearly six per cent in the opening deals to hit their all-time high of Rs 6,282.45 on the BSE. 

What will drive growth and margins in ABB India?

According to the brokerage, electrification and motion will drive the company's growth and margins. In its note, UBS stated that earnings acceleration is sustainable and plenty of growth levers are at play. 

ABB's low- and medium-voltage product suite is expanding in both range and geographical exposure, covering both conventional and emerging market segments. "There is a clear focus among global firms, like Siemens and Schneider, along with ABB, on capturing the long-term growth in electrification," the brokerage stated in its note.

On the motion side, mobility, including semi-high-speed rail, conventional rail, and metro, has led the step-up in order inflow run rate, which UBS thinks is sustainable on an annual basis (quarterly volatility might persist), given that ABB is focusing on expanding capacity commensurately to tap the growth opportunities. 

More upside to consensus on margins despite recent upgrades

According to UBS, a strong cyclical tailwind has led to robust growth and higher margins for most companies, including CG Power, ABB, and Siemens, in recent quarters.

"While the consensus margin forecast for ABB has already been raised to 210 bps for 2024 in the past 12 months, along with a 3 per cent upgrade in new order intake, we think there is ample scope for ABB to deliver on profitability, led by low- and medium-voltage electrification and motion, both of which are enjoying strong demand, with ABB sharpening its focus on product range expansion and availability," UBS highlighted. 

UBS maintains above-consensus forecasts on revenue growth and, more importantly, margins and believes that ABB is the best play on the emerging infrastructure scale-up in low- and medium-voltage electrification.

How is ABB's growth story different?

According to the brokerage, the business overlap between ABB and CG Power is largely limited to the motors segment, and within that only to low-tension motors (excluding the IE3 and IE5 motors, where ABB has a global edge). 

ABB's revenue overlap with Siemens and Schneider is more prominent. The analysts at the brokerage think that there is significant scope for ABB to ramp up its low- and medium-voltage electrification portfolio, where it trails Schneider and Siemens.

What lies ahead?

Despite near-term concerns over short-cycle order fatigue, especially in the motion division, the global brokerage believes there is plenty of scope for ABB to scale up its new order growth across motion and low/medium-voltage electrification product expansion, which does augur well for margins even at current levels. 

In addition, Jefferies has retained a buy call on ABB India. The brokerage, too, has raised the target to Rs 6,250 from Rs 6,115. 

ABB India quarterly results: How did it fare in the December quarter?

ABB India's standalone profit after tax jumped by 11 per cent to Rs 338.7 crore in the December quarter, compared to Rs 305.3 crore in the year-ago period. The company's revenue from operations jumped 13.6 per cent to Rs 2,757.5 crore in the quarter.

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