Motilal Oswal has maintained a Buy rating on ABB India Ltd, setting a 12-month target price of Rs 6,700, indicating a 28% upside from the current market price of Rs 5,247. Despite near-term headwinds in order inflow due to a softening capex cycle, the company remains poised to benefit from deeper penetration into Tier II and III cities, strong growth in high-potential segments like electrification and motion, and expanding opportunities in green energy, data centers, and digital infrastructure. With robust margins, a strong balance sheet, and commitment to sustainability, ABB India is positioning itself for long-term value creation.

Motilal Oswal Reiterates BUY with Rs 6,700 Target for ABB India

Motilal Oswal has reaffirmed a bullish stance on ABB India, citing robust fundamentals and a strong sectoral outlook. Despite a recent stock correction and modest order inflow, ABB’s long-term trajectory remains positive. Trading at 48.2x/43.4x P/E on CY26/27 estimates, the valuation is supported by superior ROE (27%) and healthy free cash flows.

Capitalizing on High-Growth Segments and Tier II & III Market Penetration

ABB’s strategy emphasizes deeper engagement with smaller cities and upcoming industrial hubs. A significant uptick in orders from Tier III and below cities was driven by the Electrification and Motion segments. This localization strategy positions ABB as a dominant player in emerging urban centers.

Additionally, ABB sees high-growth potential in data centers, green hydrogen, EV infrastructure, water treatment, and battery storage, aligning with India’s national priorities.

Electrification and Motion Segments Drive Future Revenues

Electrification and motion form over 75% of ABB’s order book and are expected to remain core growth drivers. The electrification segment, boosted by demand from chemicals, buildings, and export markets, has benefitted from margin accretion due to favorable product mix and localization. ABB's solutions span low-voltage systems, modular substations, switchgear, and EV charging infrastructure.

In motion, new product launches like IE4 Super Premium Efficiency Motors and Aluminium IE3 motors are aimed at enhancing competitiveness across cement, renewables, and transportation.

Stable Financial Performance with Room for Margin Normalization

While CY24 marked a high EBITDA margin of 18.9%, the company expects some moderation going forward. Margins are forecasted at 18.3%/17.7%/17.1% for CY25/26/27 respectively due to fading low-cost inventory benefits and potential pricing pressure. However, ABB remains structurally strong with a PAT margin target of 12–15%.

The company's cash position remains healthy at Rs 9.4 billion, supported by a free cash flow of Rs 11.2 billion in CY24.

Strong Commitment to Sustainability and ESG Goals

ABB India has made commendable progress in its environmental roadmap. The company achieved an 86% reduction in Scope 1 and 2 emissions since CY19 and 50% of its manufacturing units are now water-positive. With ambitions to cut Scope 3 emissions by 25% by 2030, ABB is integrating sustainability into its supply chain, with 40.5% of suppliers now engaged in ESG initiatives.

Order Flow and Export Outlook Remain Constructive

Order inflows in CY24 totaled Rs 131 billion, with electrification and motion leading the charge. ABB expects a 16% CAGR in order inflows and 15% CAGR in revenues through CY27, translating into PAT growth of 10%/12%/11% over CY25–27. Export contribution continues to rise, peaking in CY24, supported by increasing global integration.

Capex and Technological Upgrades Enhance Future Readiness

ABB incurred Rs 2.1 billion in capex during the year for capacity expansion and modernization. Key investments include upgrades in Faridabad, Nashik, Vadodara, and the setup of a new sales office in Mumbai. Capex projections are Rs 2.5 billion, Rs 3.6 billion, and Rs 4.1 billion for CY25/26/27, respectively—underscoring ABB’s commitment to innovation and infrastructure.

Financial Performance Snapshot

Here’s a table capturing ABB’s key performance metrics and valuations as projected:

Key Investment Risks to Monitor

Despite its strengths, ABB is not immune to macroeconomic headwinds. A potential slowdown in order inflows, intensifying competition, raw material cost volatility, or geopolitical disruptions could affect growth. Additionally, ABB’s reliance on imported technologies and group company payments (around 8% of sales) may also impact margins.

Conclusion: ABB India Remains a Core Long-Term Bet

ABB India’s positioning across electrification, motion, and automation segments, combined with its expanding rural footprint, strong balance sheet, and disciplined capital allocation, make it a compelling long-term play. Despite near-term moderation in margins and order inflows, the stock’s fundamentals remain solid. Motilal Oswal’s target of Rs 6,700 reflects confidence in ABB’s ability to capture value from India’s infrastructure and digital transformation.