ABB India LtdQ2 FY23Electrical Equipment

ABB India Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Market segments are positively inclined with some new segments growing 15%+, mid-mature segments growing 10-15%, and core segments growing 6-8%.
→Overall aim to achieve quarterly double-digit order growth of 12-15%.
→Current order backlog is strong at ₹7,700 crores, mostly from projects ensuring revenue visibility.
→Expansion in robotics, manufacturing, and process automation especially in sectors like cement, steel, chemical, oil & gas distribution.
→Export segment (15% of revenues) shows better profitability; 85% from local market distributed across 23 segments.
→Growth is supported by increasing volume, productivity improvements, and new market segments similar to the growth seen in data centers over past years.
→Expect to maintain revenue growth at 12-15% while targeting profit after tax around 8.5-9%.
→Building segment doubled manufacturing output last year indicating strong growth potential.

Category 3

→The company aims to maintain revenue growth at 12-15%, with an operating margin target of 8.5-9%. (Page 37)
→There is an ambition to stabilize double-digit profit after tax (PAT) margins in the near term (next 4-5 quarters), leveraging a strong order backlog of ₹7700 crores. (Page 25)
→Incremental profit growth recently benefited from higher other income; stable raw material costs expected but some commodity price reduction benefits may be passed to customers. (Page 34)
→New and emerging market segments (robotics, manufacturing, process automation, energy efficiency) are expanding, some growing over 15%, providing strong future volume and profit potential. (Page 43)
→The company is confident in stabilizing double-digit PBT margins, building on past margin expansion efforts. (Page 24)
→Overall, the focus is on profitable growth with balanced portfolio management across core and faster-growing sectors. (Pages 27, 36)

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→There is no explicit mention of any current or planned fundraising through debt or equity in the provided transcript.
→The company operates as a debt-free entity, as noted on page 5 where Sridhar mentions they run a debt-free company.
→They have a strong cash balance and good land bank, enabling organic expansion and productivity investments without depending on external debt.
→Capital allocation focus is on meaningful investments that yield good returns to shareholders rather than raising new capital (page 34).
→Future growth is planned through organic expansion and selective inorganic bolt-on acquisitions aligned with existing business models, but no new fundraising details are provided.
→Overall, the approach favors internal cash generation and strategic investments rather than new debt or equity issuance at this stage.

Yes

→The current order backlog stands at ₹7,700 crores, with a bulk coming from projects (Page 25).
→There is strong visibility of revenues supported by this order backlog and expected new orders in upcoming quarters (Page 25).
→Future order intake growth is targeted at a double-digit range of 12% to 15% per quarter, though exact prediction is uncertain (Page 30).
→Recent order inflow growth was about 10%, which is lower compared to previous quarters but still represents growth despite a high base (Page 29-30).
→Market dynamics suggest some normalization in customer ordering patterns, with expectations for sustainable 10%-12% annual order growth (Page 29).

Yes

→ABB India is expanding capacity mainly in Motion (MO) and Electrification (EL) segments, including investments in application/customer experience centers and robotics-focused client solutions (Page 13).
→Significant investment in a new, state-of-the-art GIS factory in Bangalore catering to both domestic and global markets (Page 12).
→Ongoing investments aimed at productivity improvements through automation and process improvements rather than large new factory constructions (Page 12).
→Business closely watches capacity utilization to decide future investments concentrating on areas with good return on capital employed (Page 11).
→Capital allocation is a top priority, with current interest income from deposits seen as temporary; expect investment deployment to improve returns long-term (Page 34-35).
→Potential expansions tied to government push on infrastructure sectors like railways and renewable power generation (Page 31, 32).
→Focus on emerging markets, new segments, and inorganic growth opportunities aligned with existing business for value addition (Page 5).

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1ABB India Ltd

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