ABB Ltd is a holding company. The company’s segments include electrification products, robotics and motion, industrial automation, power grids, corporate and others.
Though ABB secured orders worth ₹1,930 crore in 3QCY17 (vs. ₹2,970 crore in 3QCY16), adjusting for one-time large rail order in 3QCY16, fresh orders remained largely flat. Base orders were the key contributor with industry turning to improving operational efficiencies through technology and digital upgrades including robotics automation. Notably, continued uptrend in overseas business and order backlog of ₹12,130 crore augur well for ABB. Looking ahead, we expect ABB’s earnings to witness 34.5 per cent CAGR through CY16-18E, while RoE is expected to improve to 15.4 per cent in CY18E from 11.5 per cent in CY16. On the back of strong presence in power T&D space, we believe ABB would continue to command higher multiple, going forward. Valuing at 50x CY18E (15 per cent discount to its mean multiple of 60x over 200515) earnings of ₹32.1/share, we maintain our ‘Buy’ recommendation with an unrevised target price of ₹1,607.