Why ABB INDIA Share Price is Falling

ABB India, the Indian subsidiary of the global tech powerhouse ABB, has recently seen a notable decline in its share price.

Investors who once celebrated ABB's resilience and growth are now asking what's behind this unexpected dip.

With the company facing an array of both global and sector-specific challenges, market sentiment seems to be shifting, leaving shareholders and analysts alike searching for answers.

In this article, we'll dive into the potential forces impacting ABB's stock and explore whether this downturn signals a temporary setback or a broader trend.

Let's dive in...

ABB India Shares Drop on Cautious Outlook for New Order Wins in FY25

Shares of ABB India fell over 5% today after the company's post-earnings call where management provided a cautious outlook on future order inflows and execution challenges.

The company's management noted a healthy order inflow range between Rs 25-30 bn but indicated that reaching the Rs 40 bn mark remains challenging.

For the quarter, order inflows were reported at Rs 33.4 bn, marking an 11% YoY increase but falling short of analyst estimates.

Management acknowledged a slower conversion rate from order booking to revenue, attributing it to the larger size of recent orders. Unlike smaller base orders, large orders require extended timelines, impacting the pace of revenue realisation.

Nevertheless, the company remains optimistic about growth over the next three to four quarters, driven primarily by the execution of base orders.

ABB India's large orders currently stem from sectors such as metals, mining, oil & gas, transportation, and data centers. The company's order backlog is composed of 25% large orders and 75% base orders, reflecting steady demand in its core sectors.

Management highlighted that while large order execution is yet to gather full momentum, project timelines are being aligned to facilitate smoother rollouts.

ABB India's management also addressed challenges within its Low-Tension Motor segment, where the company holds a significant market share. The segment has been facing pricing pressures, which has impacted revenue.

Strong Results for the September 2024 Quarter

Despite the weak outlook for order wins, the company reported strong results for the September 2024 quarter.

ABB India reported a net profit of Rs 4.4 bn for the quarter, marking a 22% YoY increase from Rs 3.6 bn in the same quarter last year.

Revenue also came in higher stood at Rs 29 bn from Rs 27.7 bn during the same period last year. The growth in revenue was attributed to focused execution of backlog from base orders, supported by a strong book-to-bill ratio and healthy cash flow.

Electrification led the way with a significant step-up in orders for the quarter headlined by large orders from the data centre segment for the Smart Power and Distribution Solutions divisions.

ABB's Leading Role in Automation and Renewable Energy

The company has been at the forefront of India's industrial automation transformation, providing solutions for sectors like energy, transportation, and manufacturing.

In 2023, ABB saw strong order inflows, notably in the robotics and automation sectors, as industries ramped up digitization efforts.

The company's focus on sustainable automation solutions, such as energy-efficient motors and smart grids, aligns perfectly with India's growing demand for cleaner and more efficient technologies.

Going by its latest earnings call and management commentary, ABB India has highlighted the data centre segment as a key growth area, and it has already secured some large contracts.

Starting with a 100-megawatt project about seven years ago, ABB has also expanded its footprint in the renewable energy industry, contributing to over 300 projects utilizing its IoT-based Programmable Logic Controller (PLC) solution.

These automation solutions are crucial for optimising the performance of renewable energy plants, including solar, wind, and BESS.

How ABB India Share Price has Performed Recently

In the past five days, shares of the company have fallen by 4%. The stock is also down 8% in the last month.

However, in 2024, the stock is up more than 50%. It is also up more than 65% in the year gone by.

The stock touched its 52-week high of Rs 9,200 on 18 June 2024 and a 52-week low of Rs 4,147.25 on 6 November 2023.

At the current price, the company trades at a price to earnings multiple of 93x.

About ABB India

ABB India is an integrated power equipment manufacturer supplying the complete range of engineering, products, solutions and services in areas of automation and power technology.

The company is a subsidiary of ABB which is a leading electrification and automation company globally. It derives significant benefits from its parent in the form of access to centralised R&D facilities of ABB for which it pays royalty to ABB.

ABB also provides management support through delegates on the board of ABB India.

ABB is a technology leader in electrification and automation. Its solutions connect engineering know-how and software to optimise manufacturing operations through process and robotic automation.

For more details, check out ABB India fact sheet and quarterly results.

You can also compare ABB India with its peers.

ABB India vs Siemens

ABB India vs CG Power & Industrial

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...