ABB India’s data-centre-led order growth offsets persistent margin weakness

Investment View and Rating

Motilal Oswal Financial Services retains a Neutral rating on ABB India with a target price of Rs 6,700, compared with the current market price of Rs 7,285. The broker believes that robust order momentum and improving execution visibility are being offset by persistent margin pressure and demanding valuation.

ABB India reported 2QCY26 revenue and adjusted PAT above the broker’s expectations, but EBITDA margin remained below expectations because of raw-material and forex volatility. Motilal Oswal reduced its CY26 estimates by 5 per cent to reflect the combined effect of stronger order inflows and execution but weaker-than-expected margins during 1HCY26.

2QCY26 Financial Performance

Excluding the robotics division, ABB India’s 2QCY26 revenue rose 21 per cent year on year to Rs 35.6 billion, while EBITDA increased 11 per cent to Rs 4.5 billion. EBITDA margin contracted 110 basis points year on year to 12.6 per cent. Volume-led operating leverage and continuing cost optimisation were outweighed by higher input and commodity costs and a lag in passing price revisions to customers.

Forex gains aided margins by 1.8 per cent; EBITDA margin excluding forex was 10.8 per cent. Adjusted PAT, excluding robotics, increased 7 per cent year on year to Rs 3.7 billion, compared with Motilal Oswal’s estimate of Rs 3.5 billion.

For 1HCY26, revenue increased 13 per cent year on year, but EBITDA and PAT declined 11 per cent and 12 per cent respectively. Margin declined 340 basis points to 12.7 per cent. Comparisons excluding robotics are not like-for-like with the previous year.

Order Momentum and Execution Visibility

Order inflows excluding robotics rose 50 per cent year on year to Rs 43.6 billion in 2QCY26, taking the order book to Rs 119 billion, up 22 per cent year on year. Management stated that 1HCY26 orders increased 36 per cent to around Rs 86 billion and that no backlog was slow moving.

Nearly 40 per cent of the order book is expected to be executed over the next two quarters, with the remainder scheduled over the following four quarters through CY27. Data centres represented around 15–17 per cent of quarterly orders, followed by metals and mining at around 15 per cent, oil and gas at 9 per cent, buildings and infrastructure at 8 per cent, and renewables at 6 per cent.

Parent ABB reported around 82 per cent India order growth, compared with ABB India’s 50 per cent, because some Indian customer orders were booked by overseas ABB entities. Motilal Oswal has raised its inflow assumptions and expects total inflows to deliver a 16 per cent CAGR over CY26–28.

Segment Growth and Margin Outlook

Electrification

Electrification was the principal growth engine, with 2QCY26 orders up around 77 per cent and revenue up around 31 per cent year on year. Growth was supported by data centres, metals and mining, renewables, and building infrastructure.

ABB India is expanding capacity for critical data-centre products such as breakers and adding localised products at its second Nelamangala facility. Management expects data-centre demand to rise multi-fold through CY27–28. Electrification EBIT margin was 14.8 per cent, affected by metals and forex. Two price increases have been implemented, although pass-through in competitively bid system orders is limited. Motilal Oswal expects Electrification revenue CAGR of 22 per cent over CY25–28 and margin recovery to 17 per cent by CY28.

Motion

Motion orders grew around 26 per cent, led by railway traction and auxiliary converters, food and beverage motors, and large AC motors for building infrastructure. Revenue also rose 26 per cent, although railway contracts have longer execution cycles and configuration changes deferred some deliveries.

Motion EBIT margin fell to 12.0 per cent because of commodity inflation, weaker mix and temporary West Asia export disruption. Motilal Oswal forecasts Motion revenue CAGR of 12 per cent over CY25–28 and margin recovery to 16.5 per cent by CY28.

Automation

Automation orders increased around 24 per cent, while revenue rose around 7 per cent because of its project-heavy portfolio and longer execution cycles. Services, at around 30 per cent of Automation revenue, supported profitability. Motilal Oswal expects Automation revenue CAGR of 8 per cent and margin of 16 per cent by CY28.

Estimates and Valuation

Adjusted for robotics, Motilal Oswal expects ABB India to deliver CY25–28 revenue, EBITDA and PAT CAGRs of 18 per cent each. EBITDA margin is expected to reach 13.6 per cent in CY26, 15.1 per cent in CY27 and 15.9 per cent in CY28.

The Rs 6,700 target price is based on 55 times September 2028 estimated earnings. At Rs 7,285, the stock traded at 92 times, 69 times and 57 times CY26, CY27 and CY28 estimated earnings respectively.

Key Risks

• Slower order inflows, pricing pressure and intensified competition.
• Supply-chain issues and geopolitical risks.
• Elevated copper and other metal prices and continued forex volatility.
• Lower exports and execution of lower-margin projects, which could delay margin recovery.