UBS has revised its rating for ABB India Ltd. to ‘neutral’ from ‘buy’, noting that the recent strong rally has limited room for further valuation rerating. The stock is currently trading at a price that is more than 30% higher than its compounded earnings growth, with a P/E ratio of 75 for 2026 estimated earnings per share.
Despite the downgrade, UBS remains optimistic about the quality of ABB India’s earnings. The brokerage maintains its above-consensus earnings estimates for fiscal 2024 and fiscal 2025, expecting 9% and 14% growth respectively. They believe that the current valuations of the stock already reflect potential upside in earnings.
UBS sees potential for improved margins in ABB India’s electrification portfolio, but is less optimistic about profitability in the industrial revenue segment. This has led the brokerage to increase the stock’s target price to Rs 9,100 per share from Rs 8,830.
In order for UBS to consider an upgrade for ABB India, they would need to see a quarterly order run-rate above Rs 3,800 crore coming from mobility or base order growth, leading to improved earnings. Additionally, robust margins in the electrification portfolio would need to exceed expectations.
While UBS maintains its positive outlook on margins, they have downgraded ABB India to neutral and set a revised price target of Rs 9,100 based on a forward P/E ratio of 75. The company will need to sustain a quarterly order intake run rate of around Rs 40 billion or Rs 48 billion for fiscal 2024/2025 new order estimates, with a focus on mobility and process automation.
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