ABB India Ltd’s first-quarter results for 2018 failed to impress the Street, in spite of a beat in revenue and good order flows. The stock, which has displayed greater volatility than its peers in recent times, fell by around 1% on Wednesday.

Specifically, the company’s Ebitda margins betrayed expectations. So did profit growth. Ebitda is earnings before interest, tax, depreciation and amortization.

Even in order flows, there is more to it than meets the eye. The 10% year-on-year growth in the quarter is the highest in the last five years. It implies some revival in the process industries, traction in robotics and automation, transportation and renewable energy.

However, a closer look shows that the order book of Rs11,628 crore is down 3% year-on-year. Worse still, it is just a little over ABB India’s annual revenue and that is worrisome as it shortens the scope of revenue growth. Further, the management commentary in the analysts’ call was not too comforting on the outlook. Although infrastructure orders are moving at a cushy pace and the future in mobility and transportation may improve the order outlook, large private sector industries such as metals and cement are yet to see sustained capital expenditure.

Another negative is that the company’s 17% growth in revenue, though appreciable, does not paint an optimistic picture of the domestic economy. While revenue of the robotics and motion segment grew by 20%, segments such as industrial automation and electrification products hardly grew. The power grid segment clocked 40% growth but this was on a very low base. This could be the fallout of some restructuring of business heads, at the parent level.

The bigger disappointment was that the Ebitda margin of 7.5% was lower than Bloomberg’s 17-broker average of 8.3%. Also, net profit of Rs102 crore, albeit 14% higher year-on-year, came in lower than that pencilled by analysts.

Tracing ABB India’s growth trajectory over the last decade also throws up some hard facts. During the period, the company’s revenue grew at a paltry compound annual growth rate of 2.8%, but its Ebitda contracted by 0.6%. In other words, the revenue growth does not trickle down to profits. A report by JM Financial Services Ltd points out, “The outgo to parent and group entities has jumped four times in the last 10 years, from 1.9% to 7.7% of net sales, in the form of royalty, trademark fees, IT expenses and management charges."

The only charm that keeps the stock ticking at a rich valuation of 41 times fiscal year 2019 earnings estimates is its strong parentage. Multinationals such as ABB and Siemens have been allocating funds to grow in emerging markets, and have an edge in R&D and technology.