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Business News/ Markets / Stock Markets/  ABB India shares soar 8% as post-earnings rally extends to second day
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ABB India shares soar 8% as post-earnings rally extends to second day

Domestic brokerage firm Motilal Oswal lifted its DCF-based target price to ₹5,800 from an earlier target price of ₹5,480 apiece. ABB is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centres, railways, metros, and electronics.

In CY23, the stock delivered a return of 74%. Long-term investors have been rewarded even more handsomely, as shares have risen from ₹1,393 apiece to the current trading price of ₹5,375, resulting in a gain of 286% in 3 years. (Pixabay)Premium
In CY23, the stock delivered a return of 74%. Long-term investors have been rewarded even more handsomely, as shares have risen from 1,393 apiece to the current trading price of 5,375, resulting in a gain of 286% in 3 years. (Pixabay)

Despite the market trading in a narrow range, ABB India's shares surged another 8% in today's intraday session, reaching a new all-time high of 5,389 apiece. Investors continued to express optimism following the company's impressive performance in Q4CY23.

In the previous trading session, the company's shares hit a 10% upper circuit limit after it released its Q4 results on Tuesday, surpassing analysts' expectations. This prompted brokerage firms to raise their target prices, further boosting the stock for the second consecutive session.

Domestic brokerage firm Motilal Oswal lifted its DCF-based target price to 5,800 from an earlier target price of 5,480 apiece. The stock remains the brokerage's top pick in the sector. Similarly, BoB Capital Markets also lifted its target price to 5,000 apiece from 4,700. However, the brokerage retained its 'HOLD' on limited upside potential. 

Also Read: Stay light ahead of the elections; defence, engineering, railways, infra look overvalued, says Jimeet Modi of SAMCO

The company reported a profit after tax of 345 crore (up 13% YoY) for the fourth quarter and 1,248 crore (up 22% YoY) for CY2023. It reported 2,757 crore in revenues for the fourth quarter and, for the first time, 10,447 crore for CY2023.

Seamless execution of a strong backlog, revenue mix, service focus, and capacity utilisation led to increased revenue across almost all businesses and divisions.

It's important to note that the company announces its financial results based on the calendar year, not the financial year starting from April to March.

Its total orders for Q4CY23 stood at 3,147 crore, up 35% YoY. The company continues to have a strong order backlog as of December 31, 2023, at 8,404 crore, an increase of 30% YoY, which provides revenue visibility and is well aligned to support growth plans in the coming periods.

Also Read: Stock Check: JSW Infra jumps almost 100% from IPO price in 5 months; should you still buy?

ABB India develops and sells products and system solutions to utilities, industries, channel partners, and original equipment manufacturers in India and internationally. The company operates through Motion, Robotics and Discrete Automation, Electrification, and Process Automation segments.

In CY23, the stock delivered a return of 74%. Long-term investors have been rewarded even more handsomely, as shares have risen from 1,393 apiece to the current trading price of 5,375, resulting in a gain of 286% in 3 years. 

Also Read: Multibagger stock: Swan Energy delivered over 500% return in less than 3 years

Demand outlook remains strong, near-term weakness may persist

ABB is benefiting from demand tailwinds emerging from high-growth areas such as renewables, data centres, railways, metros, and electronics. Although traditional sectors, such as cement, metals, oil & gas, and pharma, are not growing at the desired pace, they still account for the bulk of the order book of 8,400 crore. 

The management indicated that as these sectors gather steam, they will act as growth catalysts going forward. Overall, the domestic market is expanding at a much faster rate than the export market. 

Also Read: IOC, HPCL, BPCL shares baking-in high margins, steep premiums, says CLSA

Motilal Oswal believes that with an expected revival of the private sector, inflows will start ramping up faster, which had been flat in the previous four quarters. So far, the company has been benefiting from opex-led orders from the private sector and will now start witnessing capex-led orders from the private sector in a few quarters after the elections, it pointed out. 

Financial Outlook

Benefiting from favorable conditions, Motilal Oswal has revised its CY24/CY25 EPS estimates upwards by 2%/4.4% to account for improved margins and higher other income. The brokerage anticipates a CAGR of 18% in ABB's order inflow from CY23 to CY25, with revenue, EBITDA, and PAT expected to grow at a CAGR of 23%, 22%, and 20%, respectively, driven by an EBITDA margin of 13.7%/13.9% in CY24/CY25.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

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Published: 22 Feb 2024, 01:25 PM IST
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