ABB India Ltd shares have gained 6.8% in the last two trading sessions after its parent released the group earnings for the January-March quarter last week. The results show continuing momentum in base orders. Base orders largely constitute product orders worth less than $15 million.

Base orders at the group level are up 5%. Importantly, orders in India increased 18%. Compare that to 10% expansion in the quarter ending December 2017 and 11% in the year ago quarter. For the full year 2017, base orders at ABB India increased by about 13%. ABB India and the group follow a January-December financial year.

To be sure, the total order book includes large orders and the above figures pertain to base orders only. But given that base orders constitute a large segment of the total order book of the group and ABB India as well, the figures point to continuing positive momentum in business in India. In fact total orders in Asia, Middle East and Africa grew 20%, according to ABB’s statement. ABB says both the large and base orders developed positively in Asia including India last quarter.

The news should please investors. With December quarter results pointing to a pick-up in execution, expectations are ABB India will post double digit growth in revenues in January-March this year. If indeed the company matches this with order inflows and commentary, then it can help the stock maintain the positive momentum.

At 37 times FY20 earnings per share, ABB India is the most expensive capital goods stock. According to an analyst with a domestic broking firm, the positive momentum in base orders is fully captured in the valuations. It’s crucial for the ordering activity to gather pace, which will be known when it announces the March quarter results next month.

IIFL Institutional Equities says ABB India expects 2018 to be a stronger year. The broking firm says the company expects industrial capital expenditure (capex) to pick up in the second half of the year with expansion plans by base metals, brownfield activity in cement, and continued capex in consumption-led food and beverages and pharmaceuticals.

This trend, along with investments in public infrastructure such as railways, is expected to accelerate earnings.

Analysts at IIFL say, “A growing bouquet of digitalization and automation-led offerings to meet the requirements of next capex/upgrade cycle place ABB on the forefront to benefit from demand recovery." They add, “We expect 18% revenue CAGR (compound annual growth rate) and 28% earnings CAGR over CY17-20. As earnings accelerate, we believe valuations will moderate."

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