ABB India order backlog and data centre expansion underpin medium-term earnings growth

Investment View and Structural Growth Drivers

In its August 3, 2026 result update, ICICI Direct Research maintains a BUY recommendation on ABB India, supported by structural demand from electrification, automation, digitalisation and AI-led data centres. ABB India is well positioned for the energy-market transformation towards electrification, automation and digitisation.

ABB India operates across Motion, which accounts for 36 per cent of business, Electrification at 45 per cent, and Industrial/Process Automation at 19 per cent.

Q2CY26 Financial Performance

ABB India reported revenue growth of 21.0 per cent year on year to Rs 3,559 crore in Q2CY26. EBITDA increased 11.4 per cent to Rs 447 crore, while EBITDA margin contracted by 108 basis points year on year to 12.6 per cent. PAT rose 8.0 per cent to Rs 370 crore.

Margin pressure reflected higher commodity prices, freight and energy costs, foreign-exchange volatility and an adverse revenue mix. ABB India also announced a special dividend of Rs 90 per share following the Robotics divestment.

Record Orders and Backlog Visibility

Order inflow increased 49.6 per cent year on year to a record Rs 4,363 crore in Q2CY26, while the order backlog rose 22.2 per cent to Rs 11,898 crore. Management stated that there are no slow-moving or non-performing orders in the backlog.

Around 40 per cent of the backlog is expected to be executed over the next two quarters, with the remainder extending into CY27. Order inflows were diversified across data centres, metals and mining, oil and gas, buildings and infrastructure, and renewables.

Segment Performance

Electrification was the principal growth driver, with revenue up 30.9 per cent year on year to Rs 1,804 crore and order inflow up 77 per cent. Its order backlog was about Rs 4,800–4,900 crore, while EBIT margin was 14.8 per cent versus 16.1 per cent a year earlier.

Motion revenue grew 16.6 per cent to Rs 1,269 crore, with EBIT margin declining to 12.0 per cent from 16.4 per cent. Its order inflow grew 26 per cent, aided by railways, metro, food and beverage, and industrial motors. Management noted that railway projects have longer execution cycles.

Process Automation revenue rose 6.5 per cent to Rs 524 crore and EBIT margin moderated to 14.6 per cent from 17.2 per cent. Process Automation order inflow increased 24 per cent, and about 30 per cent of segment revenue came from the higher-margin service business.

Pricing, Capacity and Execution Outlook

Management has implemented two public price increases, but expects their benefits to accrue gradually as pricing catches up with input-cost inflation. It is prioritising protection of current profitability rather than guiding to mid-teen EBITA margins in the near term.

ABB India has commissioned its sixth manufacturing facility at Nelamangala and is investing in localisation and capacity for switchgear, breakers and distribution equipment. Management targets 15–20 per cent capacity headroom, intended to support 10–15 per cent annual incremental sales growth.

Earnings Estimates and Valuation

ICICI Direct forecasts revenue and PAT CAGRs of 19.4 per cent and 14.3 per cent, respectively, over CY25–CY28E. Its estimates imply revenue of Rs 14,268 crore, EBITDA of Rs 1,875 crore and PAT of Rs 1,529 crore in CY26E, followed by revenue of Rs 22,500 crore and PAT of Rs 2,495 crore in CY28E.

The Rs 8,835 target price is based on 75 times CY28E EPS.

Key Risks and Near-Term Headwinds

Key risks identified by the broker are a slowdown in order-inflow growth and lower-than-expected profit margins. Management also cited elevated commodity prices, rupee depreciation, geopolitical uncertainty and supply-chain disruption as near-term headwinds.