ABB India Ltd Q2CY22 results once again posted exceptional performance

ABB India Ltd, a member of the ABB Group, headquartered in Switzerland and a pioneer in power automation technologies, was founded in India in 1949. These solutions allow industrial clients to operate better while having a smaller environmental effect. ABB has 12 production facilities in India, and one of its seven corporate research centres is located there.

The Company works on projects in the areas of pollution prevention, process automation, power transmission, and transportation. It operates in mainly three key segments including robotics & motion (41%), electrification (38%), industrial/ process automation (22%). Additionally, the company follows the calendar year as their reporting year i.e., January-December.

ABB India Ltd on 10^th August 2022 announced their Q2CY22 results, where they yet again reported stellar numbers in comparison to previous quarters. They announced solid double-digit top-line growth, which translated into a staggering 115% YoY rise in net profitability. The ABB India share price has been in an upswing on stock exchanges for a very long time and is currently trading at an all-time high of Rs 2,888 per share. With the release of Q2CY22 figures, the ABB share price has increased by about 4%. Let’s now examine their Fundamentals and technicals in order to determine the cause of their consistent excellent performance.

Key Highlights of ABB India Q2CY22 results:

• ABB India Ltd saw its revenue jump by 44% YoY to Rs 2,053 crore in Q2CY22, while up 3% QoQ
• Revenue growth was supported by motion (+66% YoY), electrification (+45% YoY) and industrial automation (+39% YoY), while robotics was down 46%
• Gross margin expanded 260bps YoY to 36% driven by higher contribution from exports and services, price hikes across product categories, and efficiency improvement across the value chain
• This led to EBITDA margin expansion of 300bps YoY to 9.7% and EBITDA growth of 110% YoY to Rs 192
• Company’s net profit increased by 115% to Rs 147 crores in Q2CY22, while sequentially it fell 60%
• The company received fresh orders worth Rs 2,767 crore in Q2CY22, a growth of 64% over
• The cumulative order book of ABB India stands at Rs 5,995 crore as on June 30, 2022

ABB   India   results   Q2CY22:   Revenue    increased    44%   YoY   due   to momentum in infrastructure development across country

ABB India Ltd saw its revenue jump by 44% YoY to Rs 2,053 crore in Q2CY22 as against revenue of Rs 1,425 crore in Q2CY21. On a sequential basis, revenues grew by 4.31% from Rs 1,968 crores in Q1CY22 to Rs 2,053 crores in Q2CY22. The momentum in infrastructure development across the country has helped global engineering and infra services firm ABB India report a 44% growth in revenue in the Q2CY22.

Exports revenue grew 45% YoY for ABB India. Share of exports is at 12% in total revenues and the same is likely to witness strong growth in CY22E given ordering trends are strong from group entities.

Q2CY22 revenues 44% YoY growth was supported by motion (+66% YoY), electrification (+45% YoY) and industrial automation (+39% YoY), while robotics was down 46% YoY. Management expects healthy demand from sectors such as renewables, water & wastewater, warehousing & logistics, electronics, etc. The strong demand enabled ABB to successfully pass on the price hikes triggered by elevated commodity prices due to geopolitical issues.

Gross margin expanded 260bps YoY to 36% driven by higher contribution from exports and services, price hikes across product categories, and efficiency improvement across the value chain. This led to EBITDA margin expansion of 300bps YoY to 9.7% and EBITDA growth of 110% YoY to Rs 192 crores.

“We are well positioned to work with customers and partners for the digitalisation and decarbonisation of Indian industries while operating our campuses with best-in-class sustainable practices. After a successful start to the first half, we expect to continue leveraging our local and global strengths for growth in the second half of 2022,” Sharma said.

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Profits grew 115% YoY backed by robust top line growth

The robust growth in the top line lifted the company’s net profit by 115% to Rs 147 crores in Q2CY22 from Rs 70 crores in Q2CY22. While sequentially it fell 60% to Rs 147 crores in Q2CY22 from Rs 373 crores in Q1CY22.

“Consistent focus on execution, value added volume mix, and consistent, assured deliveries to our customers have led to our overall growth. Our proactive engagement across high growth market segments have reaped benefits even as uncertainties of inflation and a tight supply chain persist,” Sanjeev Sharma, Managing Director, ABB India said.

ABB India results Q2CY22: Robust order book with highest ever orders received in Q2CY22

The company received fresh orders worth Rs 2,767 crore in Q2CY22, a growth of 64% over Q2FY21. The cumulative order book of ABB India stands at Rs 5,995 crore as on June 30, 2022.

ABB’s cash position continues to remain robust at Rs 2,787 crore at the end of Q2CY22 and can be utilised to expand capacities. There are opportunities to grow organically as well as inorganically.

The board of directors of the company, at its meeting held on 9 August, had approved the sale of investment in equity shares of wholly owned subsidiary Turbocharging Industries and Services India Private Limited to Turbo Systems Switzerland Limited for a consideration of Rs 355 crores. This transaction is expected to be completed by 30 September upon execution of necessary agreements, a company statement said.

Technical Analysis of ABB India Share Price

ABB India’s share has increased by about 31% YTD and nearly 68.4% over the past year. The 50 EMA is well above the 100 & 200 EMA for more than a year, indicating long term bullishness. Additionally, ABB India Ltd. has consistently produced outstanding quarterly results, providing even more justification for such investor optimism. Therefore, long term investors can maintain a long term positive view on this ABB stock.

ICICI Securities said, “We expect similar performance over the coming quarters though, on rich valuations, we maintain our HOLD rating and revise the target price to Rs2,842 (previously: Rs2,528).”

ICICI Direct said, “Overall, further penetration of automation & digitisation products and services across segments to drive long term growth. We remain long term positive and retain our BUY rating on the stock and TP of Rs 3275.”

Our view

The company said that a combination of strong order backlog supported by an ongoing strong demand environment and presence in diversified segments is expected to continue to bolster its performance.

Further, ABB continues to see recovery in certain segments and industries like datacentre, renewables, electronics, food & beverages, and pharma. It continues to focus on order win and seamless execution across projects. Therefore, making it a favourable investment avenue within the heavy electrical equipment sector.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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