Shares of capital goods firm ABB India have given multi-bagger returns to their investors in the long term, surging over 7 times in the last 10 years.
From ₹438 in April 2013, the stock has skyrocketed 630 percent to currently trade around ₹3,203.55 (as on April 12, 2023). An investment of ₹1 lakh ten years ago would have turned into over ₹63 lakh currently.
Meanwhile, in the last 5 years, it has jumped 175 percent from ₹1,161 in April 2018. Also, from its COVID low of ₹801, hit in March 2020, the stock has rallied 300 percent.
In the last one year, when the overall market sentiment was extremely volatile on the back of major headwinds like high inflation, high interest rates, lower consumption, FII outflows, and other macro concerns, the stock rose 45 percent. In comparison, the benchmark Nifty50 is up little over half a percent in this period.
Meanwhile, the stock has also advanced 19 percent in 2023 YTD. While it is down around 4 percent in April so far, it gained 4.5 percent in March, 13.3 percent in February, and 5.8 percent in January.
However, before Jan 2023, the stock had given negative returns for 4 consecutive months between September and December 2022, down 18 percent in that period.
It hit its 52-week high of ₹3,466.90 earlier this month on April 6, 2023. It had hit its 52-week low of ₹2,001 in May 2022.
ABB India Limited 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. The company was formerly known as ABB Limited and changed its name to ABB India Limited in June 2013. ABB India Limited was incorporated in 1949 and is based in Bengaluru, India. It is a subsidiary of ABB Asea Brown Boveri Ltd.
In the December quarter, ABB India reported a 62.3 percent year-on-year (YoY) jump in net profit to ₹305.3 crore versus ₹188 crore in the corresponding quarter last year. Revenue from operations, meanwhile, rose 15.5 percent to ₹2,427 crore during the period under review as against ₹2,101.5 crore in the same period of the preceding fiscal. The company follows January to December financial year.
The company achieved a significant milestone in order booking by reaching ₹10,028 crore in 2022 and ₹2,335 crore in the fourth quarter of 2022. The growth during the fourth quarter of 2022 was led by large value orders in industrial solutions and segments like data centers in electrification, it said.
However, after the recent stock rally, domestic brokerage house Kotak Institutional Equities downgraded ABB India to ‘Reduce’ from ‘Buy’. It also cut the price target on the ABB India stock to ₹3,425, indicating an upside of just 7 percent.
As per the brokerage, the assessment of the company’s 2022 annual report falls short of justifying the sustainability of the sharp improvement in its margins and working capital in the year gone by.
"The 200 bps YoY gross margin expansion and low 10 days of working capital that yields a 37 percent post-tax return on invested capital (RoIC) for ABB in 2022 may be hard to sustain and grow. This represents a downside risk to our unchanged estimates. CG Power has cited positive margin bias due to demand-supply mismatch in the Motors segment. ABB’s Switchgear segment may have had a similar case of positive bias inside, in our view. Both these sub-segments have grown faster than ABB’s 24 percent revenue growth in 2022 at 33 percent and 28 percent, respectively," it explained.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
