Fundamental Analysis of ABB India: ABB India, a heavy engineering and construction company’s share price is on an uptrend. In fact, it has gone up by more than 63% in one year. The company manufactures a variety of products like control room solutions, metallurgy products medium voltage products, and more. But, why has shareholders’ interest in the company been piqued?
In this article, we are going to do a fundamental analysis of ABB India. We’ll take a look at its business segments, its financials, and more. We’ll find out why the share price of the company has risen. Keep reading to find out!
About the Company
ABB India is a leading global engineering and construction company that manufactures heavy engineering and industrial equipment. It is an integrated power equipment manufacturer supplying a complete range of engineering products, solutions, and services in the areas of automation and power technology. The company’s products include pollution control equipment, switch gears, and high-current rectifiers.
Industry Overview
The demand for electrical equipment is expected to increase rapidly over the next few years with the steady growth of the consumption of electricity and an increasing number of large-scale power pools. Experts expect expansion in residential, commercial, and industrial demand for electrical equipment.
They say that the demand should expand with prospects of rising housing starts and higher capital outlays for expansion, modernization, and automation of factories and offices.
They expect the demand for electrical generating, transmission, and distribution equipment should rise by about 5%-7% a year for the next. As a result, the profit of these manufacturers should rise substantially as a result of the combined effects of rising sales, increasing prices, and reductions in manufacturing costs.
Business Segments
ABB India’s business segments are organized around solutions provided to its customers. These include utilities, industries, channel partners, and original equipment manufacturers. Here is an overview of its business segments:
Motion Segment
This segment provides products, solutions, and related services that increase industrial productivity and energy efficiency. This segment is the largest supplier of devices and motors globally. It serves a wide range of automation applications in transportation, infrastructure, and the discrete and process industries.
Robotics and Discrete Automation segment
The robotics segment provides value-added solutions in robotics, machine, and factory automation. The company’s focus on innovation includes extensive work in artificial intelligence an ecosystem of digital partnerships and the expansion of its production and research capabilities through its $ 150 million investment in a robotics factory in Shanghai.
Electrification segment
This segment provides technology across the full electrical value chain from the substation to the point of consumption, enabling safer and more reliable power. ABB’s portfolio in this segment includes a variety of digital and connected innovations for low- and medium-voltage, like V infrastructure, solar inverters, modular substations, and more.
Process Automation segment
This segment provides products, systems, and services designed to optimize the productivity of industrial processes. The solutions include turnkey engineering, control systems, measurement products, life cycle services, outsourced maintenance, and industry-specific products. These products are used in Industries like oil and gas, power, chemicals and pharmaceuticals, pulp and paper, metals and minerals, marine, and turbocharging.
Manufacturing
Abb India has 5 manufacturing locations across India – Nelamangala, Peenya, Vadodara, Nashik, and Faridabad certified as ‘Green Factory Buildings’ by the Indian Green Building Council (IGBC).
ABB India – Financials
Revenue & Profitability
Let us take a look at the revenue and profits earned by the company over the past few years.
Annual Revenue & Profit
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Revenue (₹ in Crores) | ₹6,690.12 | ₹7,315.06 | ₹5,820.95 | ₹6,934.00 | ₹8,567.53 |
| Profit (₹ in Crores) | ₹510.89 | ₹303.40 | ₹219.22 | ₹519.71 | ₹1,016.23 |
| Net Profit Margin | 7.64% | 4.15% | 3.77% | 7.50% | 11.86% |
ABB India follows the calendar year, i.e., January to December for accounting. The annual reports for the year 2022 are yet to be published. In the year 2021, the company received 39% of its revenue from electrification, 20% from process automation, 37% from motion, and 4% from robotics and discrete automation.
The above table has the data for revenue and profitability as filed with the stock exchanges. The company’s revenue and profit show an increasing trend. Its revenue increased at a 4-year CAGR of 6.38% and its profit at 18.76%.
Quarterly Revenue & Profit
| Quarter | December 2021 | March 2022 | June 2022 | September 2022 | December 2022 |
| Revenue (in Crores) | ₹2,101.50 | ₹1,968.37 | ₹2,052.51 | ₹2,119.74 | ₹2,426.91 |
| Profit (in Crores) | ₹188.20 | ₹373.07 | ₹140.28 | ₹197.56 | ₹305.32 |
| Net Profit Margin | 8.96% | 18.95% | 6.83% | 9.32% | 12.58% |
The company’s revenue and profitability have increased on a quarterly basis, as the chart and the table indicate. When compared, we see that the company had the highest net profit margin of 18.95% in March 2022.
Order Book
The company posted a record CY 2022 performance with orders at ₹ 10,028 crores in CY2022 and ₹ 2,335 crores for Q4 CY2022. In Q4 CY2022 (October to December 2022), ABB India’s orders were up p 4% and backlog was up 32% on a year-on-year (Y-o-Y) basis. Its revenue increased by 15% across all business areas.
The growth during the quarter (Q4 CY2022) was on the back of large value orders in industrial solutions and segments like data centers in Electrification. Better penetration in segments like railways, metals, rubber, and food and beverage and enhanced presence in tier 1 and 2 cities spurred growth in the motion segment.
The process automation segment held steady with opportunities from the paint industry and energy companies. The company’s robotics segment received significant traction in paint orders from automotive and auto component companies.
ABB continues to have a strong and consistently growing order backlog as of December 31, 2022, at ₹ 6,468 crore, which provides revenue visibility and is well-aligned to support growth plans in the coming quarters.
Key Metrics Of ABB India
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 2.00 | Dividend Yield (%) | 0.16 |
| Market Cap (₹ in Cr) | 71,188.00 | ROE (%) | 19.00 |
| EPS TTM (₹) | 48.00 | Promoter’s Holdings (%) | 75.00 |
| Stock P/E (TTM) | 92.40 | Current Ratio | 1.66 |
| Industry P/E | 32.00 | Debt to Equity Ratio | 0.01 |
ABB India is a large-cap company with a market capitalization of ₹ 71,188.00 crores as of March 2023. It has earnings per share of ₹ 48.0, indicating that ₹ 48.0 is allocated to every individual share of the stock. A high EPS indicates good profitability. Its shares were trading at a price-to-equity ratio (P/E) of 92.4 which is significantly higher than the industry P/E of 32.0. This could mean that the company’s stock is overvalued as compared to its peers. It has a dividend yield of 0.16.
Return Ratios
The company has an ideal return on equity of 19.00%. This indicates that the company generates a profit of ₹ 19.00 on ₹ 100 worth of equity that is deployed in it. Further, it has a return on capital employed of 25.4%%, indicating that it generates ₹ 25.4 for every ₹ 100 that is deployed in its business.
Debt & Liquidity Ratios
ABB India has an ideal debt-to-equity ratio of 0.01. Further, it has a current ratio of 1.66. This indicates that its current assets are more than its current liabilities.
Shareholding
The company’s promoters hold a 75.00% stake in it. Retail investors hold a 7.71% stake, FIIs hold 7.55%, and DIIs hold a 9.73% stake in the company. Further, there is no pledge against the promoters’ holding. The promoters’ stake has remained constant over the past few quarters. Moreover, FIIs have gradually increased their stake in the company from 3.76% in December 2021 to 7.55% in December 2022, which is a good sign.
Future Plans Of ABB India
The company has a stable outlook in the near future due to relatively lower inflation rates in India, stable commodity prices, rising private consumption, and the gradual revival of capex. Government measures and central bank policies are likely to provide a cushion against global spillovers.
In Closing
In this article, we did a fundamental analysis of ABB India. We took a look at its business segments, manufacturing, financials, and key metrics. In addition, we understood that one of the main reasons for an increase in investor interest in the company is an increase in its revenue and net profit on an annual and quarterly basis. That’s all for this article, folks. We hope to see you around and happy investing until next time!
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